OHIO (WTRF) — Ohio Attorney General Dave Yost has filed a motion asking to be appointed lead plaintiff in a securities class-action lawsuit claiming that Warner Bros. Discovery (WBD) deliberately misled investors during the merger of WarnerMedia and Discovery Inc., fueling $25.5 million in losses for the Ohio Public Employees Retirement System and the State Teachers Retirement System.

The motion, recently filed in U.S. District Court for the Southern District of New York, says that WBD and company executives David Zaslav and Gunnar Wiedenfels either knew or had access to adverse financial information about WarnerMedia but did not disclose it – as required by U.S. securities law – before the merger closed on April 8, 2022.

“Warner Bros. Discovery willfully withheld financial information that it was legally obligated to reveal for one highly self-serving reason – to ensure the merger’s approval,” Yost said. “In doing so, it created market distortions that cost Ohio’s pension systems and other institutional investors dearly, and that is not OK.”

At the time of the merger, the lawsuit says, WarnerMedia was in financial disarray and intentionally hid that fact from Discovery stockholders. The company, it turned out, had overinvested in costly but unproductive business lines, inflated its subscriber numbers by up to 10 million with no regard to margins, and otherwise provided false financial information to Discovery stockholders.

Had the true state of WarnerMedia’s business been disclosed, the merger consideration would have been significantly higher for OPERS, STRS and other Discovery stockholders, says Yost.

WarnerMedia’s financial challenges prompted Zaslav, the new CEO of the combined company, to disclose shortly after the merger that WBD would shut down many of its money-losing business lines, forcing the company to materially and negatively adjust its budget and financial expectations because they were wildly unrealistic.

Later, on Oct. 24 – just two quarters removed from the merger – Zaslav announced that WBD would be forced to take a massive restructuring charge, writing down between $3.2 billion and $4.3 billion.

By then, the securities violations had taken their toll on investors.

The lawsuit says that from April 11, 2022 – the first trading day after completion of the merger – to Sept. 23, 2022, the price of WBD’s common stock dropped 52.4% (from $24.78 per share to $11.79 per share) as the market became aware of the misrepresented and omitted facts.

The decline erased more than $31 billion in WBD’s market capitalization, says Yost