Warner Media Faces Lawsuit After Alleged Manipulation In Subscriber Data
Entertainment giant Warner Media faces lawsuit for raising HBO Max subscriber numbers. The merger between Warner Media and Discovery is one of the most controversial and popular topics among DC film fans. Change is not always welcome, but sometimes it is necessary.
(Image: Warner Bros Discovery) , also add image credits here
We understand this position very well, but there is still doubt, and fans are not happy with the directive. Nevertheless, this merger has brought fresh air and better quality content. Despite the above, another controversy has just started with an accusation. Allegedly, Warner misled shareholders during the studio’s merger with Discovery.
Warner Media Allegedly Manipulated Subscriber Data
The allegations are serious, accusing Warner Media of manipulating subscriber data to achieve the merger with Discovery. The lawsuit is based on the alleged addition of at least 10 million more accounts to the actual figure. With this action, the company would have deceived shareholders, conditioning those responsible for the studio’s merger with Discovery. According to the opposing party, “Warner’s delicate financial situation” led the company to lie to shareholders deliberately.
According to statements in The Wrap, this represents a clear violation of market laws, and undermines the owners’ trust in shares. As a result, they are currently facing a class action lawsuit filed by thousands of investors. All this made Discovery’s shares (valued at 24.78 per share at the time of the merger) drop to only 11 dollars.
Image via HBO Max
So far, Warner has decided to keep silent to the media, not answering to the accusations of a lawsuit. Those affected allege that “WarnerMedia was improvidently concentrating its investments in streaming and ignoring its other business lines overstated the number of subscribers to HBO Max by as many as 10 million subscribers.”
The misrepresentation of data with which Warner allegedly justified the merger and supposed good health of the streaming portal operated when Warner included AT&T customers who had received an access package to HBO Max. They included them on the list even if they never activated the subscription or accessed the service.
This restructuring has brought a real financial earthquake. The merger between Discovery and the Warner Media division of AT&T was announced for May 2021, closing negotiations this April 8. All this led the HBO Max portal to “delete content from the platform, cancel numerous movies and modify the price of subscriptions.”
The Lawsuit Warner Media Faces
The lawsuit against Warner Media for inflating the number of subscribers to facilitate the merger with Discovery is a fact. Last Friday, in New York City, the Collinsville Police Pension Board filed the lawsuit, U.S. media reported. Their basis is that “WarnerMedia had a business model to grow the number of subscribers to its streaming service without regard to cost or profitability.”
Image via Thomas Hawk
The defendants are Warner Bros. Discovery, CFO Gunnar Wiedenfels, and CEO David Zaslav.
The plaintiff suggests that anyone with legal standing, i.e., “anyone who purchased Warner stock in the market after the merger,” has the right to join the lawsuit because it affects them directly. The lawsuit filed is a class action, as they claim they could potentially represent “hundreds of thousands” of plaintiffs. They believe Warner misled shareholders in other ways that clearly violated the Securities Act to complete the merger with Discovery.
In addition, it highlights the fact that Warner issued at the time 700 million shares of common stock to those who previously invested in Discovery Inc. so that they may also be part of the lawsuit.
The grounds alleged by the plaintiff are “the Registration Statement and Prospectus and certain of the Defendants’ other public statements, contained untrue statements of material fact or omitted to state material facts required to be stated therein or necessary to make the statements therein not misleading”