A class-action lawsuit has been filed against Warner Bros. Discovery alleging the company misled its shareholders about its streaming business and number of subscribers.The plaintiff argues that Warner Bros. Discovery “made material misstatements in, and omitted material from, the Registration Statement and prospectus”.Allegations include:
- WarnerMedia had overstated the number of subscribers to HBO Max by as many as 10 million subscribers by including as subscribers AT&T customers who had received bundled access to HBO Max, but had not signed onto the service.
- Omitting information regarding HBO Max’s high churn rate, “that made the business not ‘viable’ unless the churn rate was reversed”.
- AT&T overinvesting in WarnerMedia entertainment content for streaming without sufficient concern for return on investments.
- WarnerMedia had a business model to grow the number of subscribers to its streaming service without regard to cost or profitability.
- WarnerMedia was improvidently concentrating its investments in streaming and ignoring its other business lines.
- Warner Bros. Discovery’s share price fell 52.4% from the first day of trading following the merger to the date prior to the complaint being filed (September 23, 2022).
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