Pursuit: AT & T's DirecTV Now is a flop and AT & T has lied to investors

AT & T lied to investors in order to conceal the failure of its streaming service of DirecTV Now TV channels, according to a proposed clbad action.

AT & T told investors that DirecTV Now was succeeding even as the number of its subscribers had dropped due to rising prices and the discontinuation of promotional discounts, the complaint filed Monday in Federal Court of Southern District of New York. The complaint accuses AT & T and its executives, including CEO Randall Stephenson, of violating the US Securities Act by "knowingly or recklessly" misrepresenting to investors and failing to disclose issues affecting sales of DirecTV Now.

Through quarterly and annual reports, filings with the SEC, press releases and other statements, AT & T and its executives made statements "to securities badysts and media designed to influence the AT & T securities market ", although these statements are significantly false and misleading in that they failed to disclose material adverse information and distorted the truth about AT & T's financial and business prospects" said the complaint.

In June 2018, when AT & T purchased Time Warner Inc., the shares of its shareholders were converted into AT & T shares. AT & T issued the shares pursuant to a registration statement that it previously filed with the SEC. This registration statement "touted the false and misleading results, trends and financial indicators, and omitted material facts making these results, trends and metrics misleading," the complaint said. The registration statement included documents filed between November 2016 and January 2017.

"The accused proceeded with the acquisition with the registration statement containing inaccurate and inaccurate statements of fact, both required by the regulations in force and necessary for the statements to be not misleading", declared the complaint.

DirecTV Now is the online version of DirecTV, delivered without a satellite connection. AT & T had 1.6 million subscribers to DirecTV Now as of December 31, 2018 after losing 267,000 subscribers in the fourth quarter, according to a report on AT & T's operating results. & T stated that many subscribers with very low rates did not keep the service when they had to pay the high price.

For the year 2018, DirecTV Now has gained 436,000 subscribers, but the DirecTV satellite version has lost 1.2 million subscribers, according to Leichtman Research Group.

Risks must be disclosed

The AT & T registration statement describes the annual and quarterly growth trends … including quarterly subscriber wins in its DirecTV Now service sufficient to offset any decrease in the number of subscribers. 39; subscribers to the traditional DirecTV satellite service, so that AT & T has recorded a continuing trend of net additions of subscribers to the video "" the complaint said.

But in reality, "DirecTV Now's subscribers were going (that is to say., not renewing itself) at the end of their promotional discount period, while, at the same time, DirecTV Now's new potential customers did not want to pay the highest prices and therefore did not subscribe to "At the moment when AT & T bought Time Warner," AT & T's growth trend of "net additions" was already turning into a "severe net loss". . "

Listed companies are required to inform investors of the risks. But the AT & T registration statement claimed to warn of many risks that "if" occurred "or" could "negatively affect the company without revealing that these" risks "were in place. 39, were already materialized at the time of the acquisition, "according to the complaint." I said.

Under US law, AT & T was required to disclose "any known events or uncertainties that caused or were reasonably likely to prevent disclosed disclosed financial information from being representative of future results of operations. ", says the complaint. "Undisclosed price increases and the abandonment of AT & T promotional discounts for DirecTV Now subscribers, resulting losses of DirecTV Now subscribers and the already observed reversal of its "net additions", revealed a trend of total subscriber growth (in fact, actually) and substantial affect the future results and prospects of AT & T. "

AT & T's statement on risk factors in the registration statement "did not even mention, let alone adequately describe, the risk posed by price increases and the elimination of promotional discounts for DirecTV Now subscribers, nor by the loss of DirecTV Now subscribers, "the complaint said.

AT & T publicly revealed DirecTV Now's problems on October 24, 2018, when it released its third quarter results. The complaint stated:

Loss of subscribers to the traditional DirecTV satellite jumped more than 25% from 286,000 to 359,000 per quarter. Meanwhile, DirecTV subscribers now dropped more than 85% from 342,000 to 49,000 quarterly. These drastically lower earnings for DirecTV Now subscribers have not been able to offset the dramatic increase in subscriber losses to traditional satellite services. As a result, the "net video additions" of AT & T's total 80,000 video subscribers were reversed to become a "net loss" of 297,000 subscribers.

Negative media coverage of DirecTV Now's performance has followed, and AT & T's stock price has fallen by almost 12%, according to the complaint.

Clbad Certification

The complaint relates to the certification of a group consisting of all persons having acquired AT & T common stock as part of the acquisition of Time Warner and all persons having acquired shares in the company. AT & T between October 22, 2016 and October 24, 2018.

The lead complainant is a certain Melvin Gross. The lawsuit was filed by the law firm Pomerantz LLP, which announced its investigation of AT & T in February. For its part, law firm Klein said that it had initiated a similar action in the name of shareholders against AT & T.

At least two other law firms are investigating similar complaints against AT & T. AT & T told Cord Cutters News that the claims were "totally baseless".

The Gross / Pomerantz claim seeks damages "including the amount to be proved at trial, including interest", reimbursement of legal costs and other reparations.

We contacted AT & T about the trial and will update this story if we get an answer.

In March of this year, AT & T increased the price of DirecTV Now and reduced the number of channels received by its customers. AT & T also raised the prices of DirecTV Now in July 2018, despite the announcement made to the government and a federal judge that the merger would result in a decline in television prices.