COLUMBUS, Ohio (WKBN) — Ohio Attorney General Dave Yost has filed a motion asking to be appointed lead plaintiff in a securities class-action lawsuit against Warner Bros. Discovery.
The lawsuit claims that Warner Bros. Discovery deliberately misled investors during the merger of WarnerMedia and Discovery Inc., fueling $25.5 million in losses for the Ohio Public Employees Retirement System and the State Teachers Retirement System.
The motion, recently filed in U.S. District Court for the Southern District of New York, says that WBD and company executives David Zaslav and Gunnar Wiedenfels either knew or had access to adverse financial information about WarnerMedia but did not disclose it — as required by U.S. securities law — before the merger closed on April 8.
“Warner Bros. Discovery willfully withheld financial information that it was legally obligated to reveal for one highly self-serving reason: to ensure the merger’s approval,” Yost said. “In doing so, it created market distortions that cost Ohio’s pension systems and other institutional investors dearly, and that is not OK.”
The lawsuit says that at the time of the merger, WarnerMedia was in financial disarray and intentionally hid that fact from Discovery stockholders and that the company had overinvested in costly but unproductive business lines, inflated its subscriber numbers by up to 10 million with no regard to margins and otherwise provided false financial information to Discovery stockholders.
Yost said that had the true state of WarnerMedia’s business been disclosed, the merger consideration would have been significantly higher for OPERS, STRS and other Discovery stockholders.
The lawsuit says that from April 11 – the first trading day after completion of the merger – to Sept. 23, the price of WBD’s common stock dropped 52.4% as the market became aware of the misrepresented and omitted facts.
The decline erased more than $31 billion in WBD’s market capitalization.