A shareholder has filed a lawsuit against Warner Bros Discovery, alleging that the company violated securities laws by failing to provide accurate information to investors about the potential impact of losing its long-standing rights agreement with the NBA.
Richard Collura who acquired Warner Bros Discovery (WBD) stock between February 23 and August 7, 2024, has filed a lawsuit in New York federal court, seeking class-action status for shareholders. The suit highlights a significant $9.1 billion write-down reported by the company during that period, partly attributed to the loss of NBA broadcast rights on TNT.
Notably, TNT paid an average annual fee of $1.2 billion for broadcast rights under its 2014 agreement with the NBA. In 2024, as the NBA entered advanced negotiations for a new decade-long media rights cycle, Warner Bros Discovery (WBD) was unable to finalize a new agreement before its exclusive negotiating window expired in April. This allowed the NBA to explore offers from other companies, including NBC, which reportedly proposed an average annual fee of $2.5 billion, and Amazon, with an offer of $1.8 billion.
The lawsuit claims that Warner Bros Discovery (WBD) executives frequently exaggerated the company’s financial health and business outlook. It cites statements from CEO David Zaslav during the first-quarter earnings call, where he claimed WBD was “now on solid footing with a clear pathway to growth” and expressed confidence in the company’s “ability to drive sustained operating momentum and enhanced shareholder value.”
The suit said, “During the Class Period, Defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and omitted to state material facts … [to] artificially inflate and maintain the market price of WBD securities.”
Additionally, Warner Bros Discovery (WBD) had also filed a lawsuit against the NBA arguing that the loss of the rights deal would have significant financial consequences after the league awarded a broadcast package to Amazon. The dispute was later resolved through a settlement, which included agreements to stream NBA games on Max in select international markets and a related arrangement with ESPN to ensure the continuation of Inside the NBA on air.