Warner Bros. Discovery Wins Investor Lawsuit Over HBO Max Subscriber Inflation

Warner Bros. Discovery was named victorious Monday in a September 2022 lawsuit alleging David Zaslav and other executives inflated HBO Max streaming subscriptions ahead of Warner Bros. merger with Discovery, duping “hundreds of thousands” of shareholders.

Despite alleged “half-truths,” U.S. District Judge Valierie Caproni ruled that the proposed class action lawsuit, led by Ohio Attorney General Dave Yost, would not move forward, and that WBD was “not required to disclose a fact simply because it may be relevant or of interest to a reasonable investor,” according to court documents.

Yost said that WBD also hid WarnerMedia’s strategies for licensing content and distributing films, as well as the looming demise of the CNN+, the short-lived CNN spinoff.

Judge Caproni also ruled that Yost did not explain how the the plan to pull the plug on CNN+ was related to a “misleading” content strategy for the media giant.

Yost filed the lawsuit in Sept. 2022 on behalf of the Collinsville Police Pension Board, an Illinois-based shareholder of Warner Bros. Discovery stock, which it accepted in trade for its pre-merger Class C common Discovery shares. Warner Bros. Discovery, Zaslav and CFO Gunnar Wiedenfels were named as defendants. 

“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 a November 2022 statement. “In doing so, it created market distortions that cost Ohio’s pension systems and other institutional investors dearly, and that is not OK.”

A lawyer representing Yost’s office declined to comment to Reuters on Monday.

At the time of the merger, Discovery shares were valued at $24.78, but dipped to around $11. On Monday, WBD’s stock price closed down 18 cents at $10.07, a 58% drop from when it began trading on April 11, 2022 Reuters reported.

The Hollywood Reporter first reported this story.

Pamela Chelin contributed to this report.

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