Disney, Ex-CEO Bob Chapek, CFO Hit With Shareholder Suit Over Streaming Losses

deadline.com:

To paraphrase Neil Young, Bob Chapek is gone from Disney but not forgotten. A shareholder is suing the former CEO along with former executive Kareem Daniel, current CFO Christine McCarthy and the company itself alleging violations of securities law for misleading statements about Disney+ and the health of the streaming business.

Filed on May 12, the suit by Local 272 Labor Management Pension Fund, filed in U.S. District Court for the Central District of California, seeks a lead plaintiff for a class action representing purchasers of Disney shares between December 10, 2020 and November 8, 2022, when the company dramatically missed earnings guidance and the stock took a major hit after a bumpy 2021.

Seeking a jury trial, the dense complaint (read it here) alleges: Defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (i) Disney+ was suffering decelerating subscriber growth, losses, and cost overruns; (ii) the true costs incurred in connection with Disney+ had been concealed by Disney executives by debuting certain content intended for Disney+ initially on Disney’s legacy distribution channels and then making the shows available on Disney+ thereafter to improperly shift costs out of the Disney+ segment; (iii) Disney had made platform distribution decisions based not on consumer preference, consumer behavior, or the desire to maximize the size of the audience for the content as represented, but based on the desire to hide the full costs of building Disney+’s content library; and (iv) Disney was not on track to achieve even the reduced 2024 Disney+ paid global subscriber and profitability targets, such targets were not achievable, and such estimates lacked a