Yesterday the Law Offices of Howard G. Smith announced a class action lawsuit targeting AT&T over what it claims to be misleading investors over DIRECTV NOW. The issue seems to be a question about if AT&T knowingly mislead investors when it said that DIRECTV NOW’s growth would continue.
This comes a few months after we learned DIRECTV NOW lost subscribers and now a price hike that some expect to drive away even more subscribers.
AT&T has sent Cord Cutters News the following statement in reply to our request for comment. “This is a carbon copy of a baseless suit filed in February. In both cases, the claims are wholly without merit.”
A statement posted online by The Law Offices of Howard G. Smith said:
In June 2018, in connection with its acquisition of Time Warner Inc. (“Time Warner”), AT&T issued approximately 1.185 billion new shares of AT&T common stock to former shareholders of Time Warner common stock. The Registration Statement issued in connection with the stock issuance touted yearly and quarterly growth trends in AT&T’s Entertainment Group segment, particularly Video Entertainment, including quarterly subscriber gains in its DirecTV Now service sufficient to offset any decrease in traditional satellite DirecTV subscribers, such that AT&T was purportedly experiencing an ongoing trend of total video subscriber “Net Additions.”
It subsequently became clear that AT&T had substantially increased prices while discontinuing promotional discounts for its DirecTV Now service and was consequently losing subscribers. On this news, shares of AT&T fell as low as $27.36 per share, a decline of nearly 16% from the $32.52 price per share on the exchange date for the acquisition, thereby injuring investors.
In the lawsuit from The Law Offices of Howard G. Smith said:
Defendants were required to disclose this material information in the Registration Statement for at least three independent reasons. First, Item 303 of SEC Regulation S-K, 17 C.F.R. § 229.303 (“Item 303”), required disclosure of any known events, demand, commitment, trend or uncertainties that had caused or were reasonably likely to cause AT&T’s disclosed financial information not to be indicative of future operating results. AT&T’s undisclosed price increases and discontinuance of promotional discounts for DirecTV Now subscribers, the consequent DirecTV Now subscriber losses, and the already occurring reversal of its touted “Net Additions” total subscriber growth trend were likely to (and in fact did) materially and adversely affect AT&T’s future results and prospects.
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