A proposed class action filed against Warner Bros. Discovery (WBD) in New York federal court accuses the company of misrepresenting the impact of losing NBA games on its business. Following the NBA's rejection of WBD's rights offer, the company recorded a significant goodwill impairment charge, leading to a substantial drop in its stock price.
A proposed class action, filed in New York federal court on Monday, accuses WBD of mischaracterizing the impact that losing rights to regular and postseason games for its TNT network would have on its business. In August, a month after the NBA officially rejected WBD’s offer to match the rights package that it cut with Amazon, the company$9.1 billion goodwill impairment charge related to the depreciation of its TV networks, which accounts for its failure to renew its deal with the league.
The lawsuit takes issue with WBD’s failure to disclose that the loss of NBA rights were likely to cause the company to significantly reevaluate its business, reflected in the massive impairment charge.
Investors take aim at “boilerplate” representations regarding WBD’s investments in securing licenses for sports programming in its impairment analysts last year. The company stated that its ability to obtain the licenses “will not have a material adverse effect on our business, financial condition or results of operations” while downplaying the risk of impairment charges, according to the complaint.
In May, after WBD’s exclusive sports rights negotiating window with the NBA expired without a deal, Zaslav in an earnings call touted the company’s decades-long partnership with the league and its rights to match any competing offers. The lawsuit targets WBD neglecting to disclose in financial filings the increased risk of recording billions of dollars in impairment charges if it were to lose NBA rights.
Warner Bros. Discovery NBA Class Action Lawsuit Goodwill Impairment Stock Price Drop
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