A lawsuit has been filed against Six Flags, alleging that the company misled investors prior to its $8 billion merger with Cedar Fair in July 2024. This federal class-action lawsuit claims that investors suffered “hundreds of millions of dollars in economic loss.” The complaint, filed on November 5, alleges that Six Flags and its executives provided inaccurate and misleading information about park conditions before the merger was finalized.
:max_bytes(150000):strip_icc():format(jpeg)/Six-Flags-great-adventure-070224-028dbbcb0d8e4ac1ac13660a34832ae2.jpg)
The lawsuit was initiated by the municipal pension fund of Livonia, Michigan, and was filed in the U.S. District Court of Northern Ohio. It accuses Six Flags of negligently preparing a merger statement that failed to disclose the underinvestment and financial requirements of legacy Six Flags parks. The complaint asserts that basic park maintenance, operational improvements, infrastructure repairs, and ride updates were deferred, leading to significant capital and operational expenditures.
The lawsuit also singles out Selim Bassoul, the former CEO, and Richard Zimmerman, the current CEO of Six Flags, as defendants. It claims that Bassoul’s decision to reduce employee headcount in a cost-cutting measure negatively impacted the company’s operational competence and guest experience. Investors were allegedly misled into believing that the company had made substantial investments in existing parks, contrary to the actual situation.
The class-action lawsuit aims to represent all individuals and entities who acquired Six Flags common stock before the merger took place. It seeks compensatory damages and legal fees for the economic losses incurred by investors, which are estimated to be in the hundreds of millions of dollars. The lawsuit highlights that Six Flags’ stock price has plummeted from $55 per share on the merger day to approximately $16 per share as of November 12, as reported by Yahoo! Finance.
Gary Rhodes, the corporate director of communications at Six Flags, declined to comment on the lawsuit due to the ongoing litigation. The lawsuit coincided with the company’s announcement of disappointing quarterly earnings, with a $1.2 billion loss reported for the three-month period ending September 28. Despite a slight increase in year-over-year attendance, the company fell short of achieving the desired returns.
During the earnings call, Executive VP and CFO Brian Witherow emphasised the need for strategic allocation of investment dollars and a focus on underperforming parks to improve financial performance. Witherow highlighted the company’s intention to reduce debt by selling off parks in their portfolio. This strategy was reinforced by the permanent closure of Six Flags America and Hurricane Harbor water park in Bowie, Maryland, which had been operating for over 50 years.
The lawsuit against Six Flags underscores the challenges and complexities faced by investors in the wake of corporate mergers and acquisitions. The allegations of misleading information and financial losses raise questions about transparency and accountability in the business world. As the legal proceedings unfold, stakeholders will be closely monitoring the developments and outcomes of the case.