Warner Bros Discovery beats Ohio AG lawsuit over merger disclosures

By Jonathan Stempel

NEW YORK (Reuters) -Warner Bros Discovery on Monday won the dismissal of a proposed class action led by Ohio Attorney General Dave Yost, claiming it concealed negative financial information prior to the April 2022 merger of AT&T’s WarnerMedia and Discovery.

The attorney general said offering documents for the merger overstated how many streaming subscribers were paying for content including at HBO and HBO Max; concealed WarnerMedia’s strategies for licensing content and distributing films; and hid the impending demise of the CNN+ streaming service.

Yost, on behalf of the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, said that as the truth came out, Warner Bros Discovery’s stock price fell more than 40% over four months, wiping out nearly $25 billion of market value.

U.S. District Judge Valerie Caproni in Manhattan, however, said the offering documents accurately explained how the company calculated streaming numbers, and that defendants including Chief Executive David Zaslav were not required to disclose various other information under federal securities laws.

She also said Yost failed to explain how the planned CNN+ cancellation rendered statements about Warner Bros Discovery’s broader content strategy misleading.

Monday’s dismissal was with prejudice, meaning the lawsuit cannot be brought again.

A lawyer representing Yost’s office declined to comment.

Warner Bros Discovery’s dozens of brands also include DC Comics, Food Network, Magnolia Network, TBS and TNT.

The law firm Weil, Gotshal & Manges represented Warner Bros Discovery, Zaslav and some other defendants.

It called the decision a “complete victory,” and said the challenged statements were “objectively true.”

Warner Bros Discovery’s stock price closed on Monday down 18 cents at $10.07, which is 58% below where it began trading on April 11, 2022.

The case is Ohio Public Employees Retirement System et al v Discovery Inc et al, U.S. District Court, Southern District of New York, No. 22-08171.

(Reporting by Jonathan Stempel in New York; Editing by Stephen Coates)