A pension board has sued Warner Bros. Discovery (WBD), CEO David Zaslav and CFO Gunnar Wiedenfels, claiming that they misled shareholders in various ways, including by inflating HBO Max’s subscriber numbers by as many as 10 million, during the process of the Discovery - Warner Bros. merger completed this past April.
The class-action lawsuit, filed last Friday by the Collinsville Police Pension Board—which accepted WBD stock in trade for its pre-merger Class C common Discovery shares — asserts that anyone who purchased WBD on the open market after the merger is also eligible to join the class action, reports The Verge.
WBD stock shares were just above $11 as of Tuesday. Discovery shares were priced at $24.78 when the merger occurred.
The suit alleges multiple violations of Securities and Exchange Commission regulations, including that WarnerMedia was “improvidently concentrating its investments in streaming and ignoring its other business lines … [and] 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.”
It also claims that then Warner parent AT&T “was overinvesting in WarnerMedia entertainment content for streaming, without sufficient concern for return on investments”... through a business model that focused on growing subscriber numbers “without regard to cost or profitability.”
The plaintiffs are seeking a trial by jury.
WBD and the executives have not responded to requests for comment by The Verge and other outlets.