Class Action: AT&T Lied to Investors
A proposed class action says that AT&T lied to investors about its failing DirecTV Now service.
According to the complaint, AT&T reported that DirecTV Now was succeeding even as subscribers were ditching the streaming service. The plaintiffs say the company made false statements to influence the market for AT&T securities. It allegedly happened at a critical time for the company, which bought Time Warner last year in a stock swap. Time Warner shareholders got AT&T stock, but may also have gotten the short end of the stick.
DirecTV Now is the online version of DirecTV, which requires a satellite hookup. In 2018, DirecTV Now reported 436,000 new subscribers, but DirecTV lost 1.2 million customers.
The problem, the plaintiffs say, was that subscribers didn't want to pay for increases after promotional discounts. This was a risk that AT&T should have disclosed in its registration statement with the Securities and Exchange Commission, the lawsuit says. By the time of the Time Warner acquisition, the proposed class-action alleges, "AT&T's reported 'net additions' growth trend was already reversing into a sever 'net loss.'"
AT&T "touted false and misleading financial results, trends, and metrics," according to the complaint. The company also allegedly "omitted material facts rendering those financial results, trends, and metrics materially misleading." In its registration statement, AT&T said risks "could" adversely affect the company. Those risks "had already materialized" at the time of the acquisition, the plaintiffs allege.
After the June acquisition, AT&T reported the subscriber problems. In its third-quarter report on Oct. 24, 2018, the company said: "Traditional DirecTV satellite subscriber losses jumped over 25% from 286,000 to 359,000 quarterly. Meanwhile, DirecTV Now subscribers plummeted over 85% from 342,000 down to 49,000 quarterly."
The news pushed down AT&T stock nearly 12 percent, the lawsuit says. The complaint seeks class certification for all people who acquired AT&T common stock in the Time Warner deal, and anyone who acquired AT&T stock between October 22, 2016 and October 24, 2018.
A similar lawsuit, on behalf of all shareholders, is already pending against AT&T.
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