Former Disney CEO Bob Chapek, CFO Christine McCarthy, and Others Accused of Misleading Investors About Disney+ in Lawsuit
An investor has filed a proposed class action in the US District Court for the Central District of California, alleging that The Walt Disney Co.’s reorganization in October 2020, led by its new CEO Robert Chapek, was designed to conceal significant costs associated with its Disney+ streaming service.
The lawsuit names Disney, Robert Chapek, and other executives as defendants. According to the complaint filed on May 12, the defendants are accused of repeatedly misleading investors about the actual success of the Disney+ platform. They are alleged to have concealed the true expenses involved in maintaining substantial subscriber growth and misrepresented the platform’s profitability prospects, claiming it would achieve profitability by the end of the fiscal year 2024.
Related – Disney+ Subscription Update: Price Increase Coming to Ad-Free Premium Tier
The plaintiff, the Local 272 Labor-Management Pension Fund, claims that the executives engaged in a strategy where they initially released content meant for Disney+ on a different platform. This tactic was allegedly employed to transfer marketing and production costs from Disney+ to the legacy platform, according to the lawsuit.
The reorganization led by CEO Robert Chapek is said to have significantly deviated from Disney’s traditional reporting structure, resulting in internal controversy. The power and control that were previously held by creative content executives were purportedly redirected to Chapek’s subordinate, Kareem Daniel, who is also named as a defendant in the case.
In response to a request for comment to Bloomberg Law, Disney stated via email that they are aware of the complaint and plan to vigorously defend themselves in court.
Following these events, Robert Chapek was subsequently replaced by the former long-term CEO, Robert Iger. Upon his return in November 2022, Iger initiated another reorganization and announced the departure of Kareem Daniel.
Related – Kareem Daniel Leaves Disney Following Bob Chapek’s Departure
According to the pension fund, as details regarding underwhelming Disney+ subscriber growth and the company’s financial results emerged, Disney’s stock price experienced multiple shocks.
The complaint estimates that the proposed class for the lawsuit could potentially include hundreds or even thousands of members. The pension fund is seeking damages and injunctive relief based on its securities fraud allegations.
The fund and the proposed class are being represented by Robbins Geller Rudman & Dowd LLP and Pitta LLP.
The case, titled Local 272 Labor-Mgmt. Pension Fund v. The Walt Disney Co., is filed in the US District Court for the Central District of California under docket number 2:23-cv-03661. The complaint was filed on May 12, 2023.
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