According to the lawsuit, at the time of filing the Registration Statement and Prospectus, defendants either knew or had access to adverse information concerning operations of the WarnerMedia business of AT&T. Among other things, as subsequently disclosed by defendants after the merger:
- WarnerMedia’s HBO Max streaming business had a high churn rate that made the business not “viable” unless the churn rate was reversed;
- AT&T was overinvesting in WarnerMedia entertainment content for streaming, without sufficient concern for return on investments;
- WarnerMedia had a business model to grow the number of subscribers to its streaming service without regard to cost or profitability;
- WarnerMedia was improvidently concentrating its investments in streaming and ignoring its other business lines; and
- WarnerMedia had overstated the number of subscribers to HBO Max by as many as 10 million subscribers, by including as subscribers AT&T customers who had received bundled access to HBO Max, but had not signed onto the service.
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