This post has been updated.
An investor has sued SeaWorld for an alleged failure to give stockholders a heads up about the “Blackfish” backlash weeks after the company’s first admission that the controversial movie was hitting its bottom line.
A securities litigation law firm organized what it hopes will be a class-action complaint against the company Tuesday, zeroing in on comments by SeaWorld’s CEO and others have who purportedly understated the film’s impact on the theme parks. Federal securities laws require public companies to disclose potential deterrents to business.
A SeaWorld spokesman declined to comment Wednesday, citing company policy on active litigation.
Here’s a rundown of the three big claims the lawsuit makes.
SeaWorld’s cover-ups extended to the stock market.
“Blackfish” pans SeaWorld’s practice of holding killer whales in captivity and a series of former trainers and experts in the documentary emphasize why the orcas don’t belong in tanks. The film, released in January 2013, put particular emphasis on Tilikum, an orca involved in two trainer deaths.
The suit, led by stockholder Lou Baker, says SeaWorld should’ve given shareholders a heads up about the allegations raised in the film when the company went public in April 2013.
Filings related to the public offering deceived potential investors, the suit claims, because they failed to delve into the company’s treatment of orcas and potential attendance impacts and subsequent filings also played down its impact.
The timing breakdown will need some explanation, though. “Blackfish” premiered in January but didn’t hit theaters until July, months after SeaWorld’s public offering.
SeaWorld seemed to think the movie and its claims would simply fade away.
The company’s approach changed late last year after the film appeared on CNN and Netflix, fueling public awareness about the film and its claims.
SeaWorld kept blaming bad attendance on Easter and other factors instead of “Blackfish.”
SeaWorld partly blamed attendance drops on Easter two years in a row.
First came last August, when the company reported a 9 percent drop in its second-quarter attendance. SeaWorld pointed to increased ticket prices, bad weather and the timing of Easter as potential reasons for the decline.
In the months that followed, SeaWorld’s public statements seemed to mostly match revenue trends revealed by the company’s lease payments to the city of San Diego. SeaWorld rents land from the city of San Diego and pays rent based on shares of 19 of its revenues. An analysis of SeaWorld’s rent payments, which are meant to mirror the local park’s overall revenues, revealed the company’s performance didn’t stray much from its public claims that “Blackfish” wasn’t hitting it hard – at least through January.
SeaWorld executives again referenced Easter as they released first quarter results this May. Attendance was down 13 percent.
“Attendance in the first quarter was impacted by a shift in the timing of Easter into the second quarter of 2014, which caused a shift in the spring break holiday period for schools in many of the company’s key source markets. Attendance was also impacted by adverse weather,” the company wrote in a press release.
SeaWorld changed its tune last month when it admitted for the first time that fallout from “Blackfish” – specifically California legislation that aimed to end orca breeding and shows (it’s since been tabled) – might be dissuading visitors.
Within a day of the disclosure, SeaWorld shares dropped more than 30 percent.
Baker’s suit suggests SeaWorld knew “Blackfish” was hurting the company and thus, its investors, long before it said so.
SeaWorld’s biggest shareholder was in on the deception.
Equity firm Blackstone Group bought SeaWorld almost five years ago and Baker’s lawsuit claims the organization recognized the rising tide against SeaWorld.
“By virtue of their high-level positions, agency, and their ownership and contractual rights, participation in and/or awareness of the company’s operations and/or intimate knowledge of the false financial statements filed by the company with the SEC and disseminated to the investing public, the individual defendants had the power to influence and control, and did influence and control, directly or indirectly, the decision-making of the company, including the content and dissemination of the various statements that plaintiff contends are false and misleading,” his suit alleges.
The lawsuit also notes that Blackstone has dumped much of its SeaWorld holdings.
As of mid-August, Bloomberg reported Blackstone’s stake in SeaWorld had fallen to just 22 percent.