Lawsuit Blames Bob Iger, Bob Chapek For 'Misleading' Investors

Current Walt Disney Company CEO Bob Iger, former CEO Bob Chapek, and former CFO Christine McCarthy are just a few of the Disney executives listed as defendants in a new derivative lawsuit filed against the company.

Stourbridge Investments is suing The Walt Disney Company as they claim current and former executives “repeatedly misled investors about the success” of the Disney+ streaming platform, which contributed to “significant losses and damages”.

Stourbridge Investments filed a lawsuit on August 23 blaming executives such as Bob Iger, Bob Chapek, and Christine McCarthy, for making “materially misleading statements and/or omissions” regarding the true financial state of Disney+.

“Plaintiff brings this action derivatively for the benefit of Nominal Defendant Disney against certain of the Company’s current executive officers and directors aiming to rectify the Defendants’ violations of the Exchange Act and breaches of fiduciary duties for issuing false and misleading statements and/or omitting material information in the Company’s public filings and proxy statements from approximately December 10, 2020 to the present,” the lawsuit states, per Deadline.

The lawsuit also states that Disney Media and Entertainment and Distribution (DMED) “became responsible for the monetization of all Disney content globally,” something that allowed Disney to “inappropriately shift costs out of the Disney+ platform and onto legacy platforms.”

“To conceal these adverse facts, defendants engaged in a fraudulent scheme designed to hide the extent of Disney+ losses and to make the growth trajectory of Disney+ subscribers appear sustainable and 2024 Disney+ targets appear achievable when they were not,” Stourbridge claims. “Specifically, defendants used the newly created DMED to inappropriately shift costs out of the Disney+ platform and onto legacy platforms."

There have been at least two previous lawsuits claiming the same "misleadings".

Stourbridge Investments listed very specific instructions for the Disney board and executives:

Directing Disney and the Individual Defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect Disney and its shareholders from a repeat of the damaging events described herein, including, but not limited to, putting forward for shareholder vote …resolutions for amendments to the Company’s By-Laws or Articles of Incorporation.

This new lawsuit comes just as Disney’s stock closed at a nine-year low of $82.47 per share on August 24.

During Disney’s Q3 2023 earnings call, the company shared that it’s revenues for their direct-to-consumer products (including Disney+ along with Hulu and ESPN+) increased by nine percent to $5.5 billion in the quarter. During the earnings call, current Disney CEO Bob Iger admitted that Disney+ overachieved when it first launched.

In November 2022, The Walt Disney Company announced that Disney Chief Executive Officer, Bob Chapek, 62, would be stepping down from his position, and Robert A. Iger, 71, would return to run the company — effective immediately.

“We thank Bob Chapek for his service,” Susan Arnold, the board chair, said in a statement. “The board has concluded that as Disney embarks on an increasingly complex period of industry transformation Bob Iger is uniquely situated to lead the company through this pivotal period.”