Sep 28, 2022

Companies Line Up to File Class Action Lawsuit Against WBD as Stock Prices Fall

Bernstein Liebhard LLP and Rosen Law Firm of New York, Schall Law of L.A.-Pennsylvania, and the Collinsville Police Pension Board have filed a class action lawsuit on behalf of at least some of the company's investors against Warner Bros. ) in a class action lawsuit against the company on behalf of its investors, investors whose shares of WBD stock have fallen more than 50% since the first day of trading following the merger in April. [At the time of the WarnerMedia/Discovery merger, both companies allegedly knew or could have known adverse information about WarnerMedia's operations while it was still owned by AT&T.

One of the claims is that WarnerMedia's HBO Max streaming business has a high churn rate and that the business cannot be viable unless that churn rate is reversed. Another common contention is that AT&T over-invested in streaming content without adequate consideration of return on investment, and that Warner's business plan to increase HBO Max's subscriber base was developed without regard to cost or profitability.

Finally, and perhaps most strikingly, the complaint alleges that at the time of the merger, Warner overstated the number of HBO Max subscribers by 10 million by including AT&T customers who had received bundled access to HBO Max but had not subscribed to the service.

According to Bernstein Leibhard,

this adverse information was not disclosed to Discovery shareholders in the registration statement or prospectus prior to the effective date of the merger. When the true details were released to the market, the lawsuit alleges, investors were harmed.

From April 11, 2022 (the first trading day after the merger was completed) to September 23, 2022 (the date before the complaint was filed), WBD's market price fell 52.4%, from $24.78 to $11.79 per share; according to Bernstein Leibhard, this decline was due to "a market aware of the aforementioned misstatements and omitted facts."