Bob Chapek, the former Disney CEO who was abruptly ousted from the company last November, is among a group of executives facing a lawsuit claiming violations of securities law for allegedly providing misleading statements and omissions about Disney+ and its subscriber growth.
The case, filed by Local 272 Labor Management Pension Fund on May 12 in the U.S. District Court for the Central District of California, also names former Disney executive Kareem Daniel and current CFO Christine McCarthy, as well as the Walt Disney Co. itself, as defendants. The document states that the case seeks a lead plaintiff and judicial determination for a class action suit representing Disney shareholders from Dec. 10, 2020 to Nov. 8, 2022.
“Each of the Individual Defendants was directly involved in the management and day-to-day operations of the Company at the highest levels and was privy to confidential proprietary information concerning the Company and its business, operations, services, plans, and present and future business prospects,” reads the 39-page document. “In addition, the Individual Defendants were involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein, and were aware of, or recklessly disregarded, the false and misleading statements being issued regarding the Company, and approved or ratified these statements, in violation of the federal securities laws.”
The lawsuit alleges that Chapek and other executives did not properly disclose the truthful state of Disney, specifically its projections for Disney+ subscriber numbers and the company’s overall health in the streaming industry. While the company’s stock has continued to take major hits over the past months, it is not an outlier in the entertainment industry, which has seen studios struggle to penetrate the streaming space as the linear television marketplace continues to decline.
In a statement, Disney stated, “We are aware of the complaint and intend to defend vigorously against it in court.”
Attempted class action suits often don’t advance to jury trials, though this case remains somewhat unique in the plaintiff’s decision to name specific executives. Chapek exited Disney in November, with his predecessor Bob Iger taking back the helm to lead the financially embattled company. Daniel’s departure was announced the next day, as Iger began to reconstruct the Disney executive suite. McCarthy’s tenure spans both leadership regimes.
Last week, Disney reported that its streaming service had lost four million subscribers, though that quarterly drop was less steep than the previous quarter.