Investors have filed a lawsuit alleging Warner Bros. Discovery misled shareholders about the impact of losing its long-standing NBA rights deal, which resulted in a massive write-down.
- November 27, 2024
AceShowbiz - A shareholder named Richard Collura filed the suit in New York federal court seeking class action status on behalf of investors who purchased WBD stock between February 23-August 7, 2024. During that period, WBD took a $9.1 billion write-down related in part to the loss of the NBA on TNT.
The suit alleges that WBD defendants, including CEO David Zaslav and CFO Gunnar Wiedenfels, made false and misleading statements about the company's business prospects during the specified period. It claims they failed to disclose that negotiations with the NBA were likely to cause a significant reevaluation of the business and goodwill.
The suit points to optimistic statements made by Zaslav, such as claiming the company was "now on solid footing with a clear pathway to growth." However, WBD's stock price fell after the company announced the loss of NBA rights and has struggled since Discovery acquired Warner Media.
Investors argue that WBD had prior warnings about the risks of losing sports rights, but dismisses them as generic boilerplate. They also highlight that WBD sued the NBA for awarding rights to Amazon, acknowledging the devastating impact of the loss.
The lawsuit alleges that the defendants engaged in a plan to deceive investors and artificially inflate the market price of WBD securities. Investors must prove that the defendants knew their statements were misleading or acted recklessly.
Warner Bros. Discovery has not yet responded to the lawsuit. In July, the company settled with the NBA after initially suing the league over the rights loss. Under the settlement, "Inside the NBA" will continue airing on ESPN, while TNT will retain production rights.
