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When SeaWorld Entertainment reported its second-quarter financials on Aug. 13, it acknowledged for the first time that Blackfish had in some way hurt its business. Up until then, the parks giant preferred to not draw any direct line between attendance and the 2013 documentary that attempted to show mistreatment of orcas in captivity. The silence has now provoked a shareholder class-action lawsuit filed on Tuesday in California federal court.
Lou Baker, on behalf of himself and others similarly situated, filed the complaint, which objects to various statements made by the company since Gabriela Cowperthwaite‘s film premiered at the 2013 Sundance Film Festival.
Among the targets is literature submitted by SeaWorld to the SEC in April 2013 in connection with its IPO.
According to the complaint, “The Registration Statement and Prospectus was materially false because it failed to disclose that SEAS (a) had improperly cared for and mistreated its Orca population causing mental distress to the Company’s Orca population affecting trainer and audience safety; (b) continued to feature an Orca that had killed and injured numerous trainers; and (c) consequently exposed the Company to material and uncertainties that could adversely impact attendance at its family oriented parks.”
Then came certified quarterly financial reports and the attendant press releases putting its performance into perspective. For example, SeaWorld reported a 9 percent drop in attendance during the first half of 2013. While Blackfish didn’t come out in theaters until July 19, 2013, that’s not stopping the plaintiff from claiming another misrepresentation.
“SEAS falsely claimed that the drop in attendance was a product of the timing of Easter, when in reality, the bad publicity from the Blackfish film caused families to stay away from SEAS parks,” states the lawsuit.
For the entire 2013, attendance dropped 4.1 percent, and the lawsuit quotes SeaWorld CEO Jim Atchison as blaming “unexpected adverse weather conditions in the Company’s second quarter and July as well as the impact of an early Easter in 2013.”
The lawsuit poses another theory on causation: the mounting backlash from Blackfish.
Attendance issues came up again in the early months of 2014, and Atchison is said to have attributed attendance declines in the first quarter to the shift of Easter and spring break into the second quarter. “The reality however was that the decline in attendance was the result of the Blackfish film,” the lawsuit asserts.
It was only in August that the company “finally came clean,” say the shareholders, citing a press release that mentioned the impact of media attention to proposed California legislation that would outlaw keeping orca whales in captivity for the purpose of entertainment. Afterward, SeaWorld’s stock dropped nearly 33 percent, or $9.25 per share.
The lawsuit now alleges violations of securities laws and faults the company for its statements and failures to make reasonable investigations. Among the defendants is The Blackstone Group, which was a majority shareholder of the company until cutting its equity to 22 percent, according to Bloomberg. The plaintiff will still need to prove causation, but if the lawsuit advances through discovery, it could provide some revelations about internal discussions at the company after the film came out and was repeatedly shown on CNN.
SeaWorld said it wouldn’t comment on pending litigation.
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