For an investor to make educated decisions on whether or not to support a company, they need accurate information about that company. To that end, in the United States, companies are legally prohibited from misleading or lying to investors or potential investors. The past few months have seen representatives of companies making false statements and being punished for it. The most publicized incident has been Elon Musk's false tweets about taking Tesla private. His punishment was swift. This week, another big name is being accused of lying to investors: AT&T.
According to a class action lawsuit, AT&T has been lying to investors about the success, or lack thereof, of the DirecTV Now streaming service. Since its launch, the service's price has increased significantly both in promotional pricing ending and actual price increases. As those prices have increased, the subscriber count has decreased. The complaint alleges that the company hid that fact from investors, as well as other factors, both internal and external, which were affecting the success fo the brand.
In evidence is the registration statements made when AT&T closed its purchase of Time Warner. In those documents, AT&T claimed that the subscriber growth of DirecTV Now was more than sufficient to offset the losses that traditional DirecTV was seeing. As it turns out, DirecTV Now was already seeing subscribers jump ship, especially those who had signed on under promotional pricing that was ending.
In October 2018, AT&T finally revealed the bad news about the services, saying,
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. These dramatically diminished DirecTV Now subscriber gains were nowhere close to offsetting the dramatically increased traditional satellite subscriber losses. As a result, Defendant AT&T's 80,000 total video subscriber "Net Video Additions" had reversed into a 297,000 total subscriber "Net Loss."
After the revelation and the resultant media coverage, AT&T's stock price fell 12 percent. That loss to investors could have mitigated if AT&T had been upfront about the troubles with the service all along, rather than hiding them behind false claims.
Melvin Gross is the lead plaintiff and is currently seeking class action classification in the hopes of including all investors who were affected by the false information.