Warner Bros. Discovery Sued for Allegedly Deceiving Investors, Lying About HBO Max Subs

An Illinois police pension fund is suing Warner Bros. Discovery alleging that Warner Bros. deceived investors by misrepresenting HBO Max subscriber numbers during the merger with Discovery. The lawsuit. According to The Wrap, a lawsuit was filed in New York last week on behalf of the Collinsville Police Pension Board, which is an Illinois-based Warner Bros. Discovery shareholder, having accepted shares of WBD in trade for pre-merger Class C common Discovery shares. More than 700 million shares of WBD were issued to Discovery common and preferred shareholders as part of the merger.

The lawsuit, which names Warner Bros. Discovery, CEO David Zaslav, and CFO Gunnar Wiedenfels as defendants, claims that among several items of "adverse information" being kept hidden, Warner Bros. and Discovery misrepresented the subscriber information for HBO Max, overstating the number of actual subscribers to the service by a significant amount.

"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," the lawsuit states. The lawsuit alleges three separate Securities and Exchange Commission violations and is seeking a jury trial for monetary damages.

This lawsuit is just the latest development with the Warner Bros. Discovery merger which has seen a flurry of headlines in recent months, especially pertaining to HBO Max. Back in August, the planned merger of HBO Max and discovery+ was announced for the summer of 2023. There's also been announcements about shifts in strategy for HBO Max with the platform no longer focusing on live-action kids and family programming, sudden cancellation of numerous animated series — as well as their removal from the platform entirely. There have also been layoffs both at HBO Max and at Warner Bros. Discovery overall.

There has even been speculation that more upheaval for Warner Bros. Discovery could be on the way with one recent report speculating that the company could be setting itself up to be sold to NBCUniversal, though negotiations between NBCUniversal and Warner Bros. Discovery couldn't take place until April 2024 at the earliest as that is when Comcast has the right (but not the obligation) to sell its remaining 33 percent of Hulu to Disney.

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