A proposed class action claims FuboTV Inc. harmed investors financially after a series of negative research reports triggered a drop in the company’s stock price.
According to the 39-page lawsuit out of New York federal court, misleading statements issued by FuboTV with regard to its financial health and operating condition artificially inflated the price of the virtual multichannel video programming distributor’s (vMVPD) stock. The case says the statements misrepresented Fubo’s growth prospects, factors that could affect its ability to generate subscription and advertising revenue and its ability to enter the online sports wagering arena.
Upon the release of a series of reports questioning Fubo’s business prospects and financial health, the company’s stock price plummeted 54 percent between December 23, 2020 and January 4, 2021, a drop that injured investors financially, the suit claims.
Fubo is a vMVPD that offers subscribers access to live sporting events, news and entertainment content over the internet, the lawsuit begins. According to the case, the company generates the bulk of its revenue from advertising and subscriptions and positions itself as a content distributor at the “intersection” of cord-cutting, connected TV advertising and online sports betting.
With the March 2020 announcement of its merger with FaceBank Group, Fubo began to issue a series of misleading statements in which it exaggerated its growth capabilities, the lawsuit says. Per the complaint, Fubo assured investors that it was “well-positioned” to become a leading TV-streaming platform and had “a great many reasons . . . to be optimistic” while failing to disclose materially adverse facts about the company’s business, operational and compliance policies.
More specifically, the case claims the defendants failed to disclose that:
Fubo’s growth in subscribers and profitability were unsustainable after the seasonal surge in subscription levels;
Fubo’s product offerings were subject to cost escalations;
The company would not be able to achieve its goal of becoming a sports book operator and would be unable to capitalize on its “only sports wagering opportunity”;
Fubo’s data and inventory were not differentiated to allow the company to achieve its long-term advertising growth goals and forecasts;
The company’s valuation was overstated; and
The acquisition of Balto Sports did not provide the promised synergies and expertise and allow Fubo to expand into online sports wagering.
According to the lawsuit, these adverse facts began to come to light on December 23, 2020 in the wake of what the case describes as “days of meteoric rise,” when research firm Lightshed Partners initiated coverage of Fubo. Scathing critiques of the company’s sports betting goals and business model were released over the next few days by Lightshed, who called Fubo’s chances of achieving success with sports betting “pure fantasy,” and other securities analysts, including Kerrisdale Capital and Motley Fool, who described the company’s strategy as essentially “putting lipstick on a pig,” the complaint states.
In response to the reports, Fubo’s stock price plummeted from $52.59 per share on December 23, 2020 to close at $24.24 on January 4, 2021, causing investors “significant losses and damages,” the case says.
The lawsuit looks to represent anyone who purchased or otherwise acquired Fubo shares between March 23, 2020 and January 4, 2021 and were damaged upon the release of the corrective disclosures described above.
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