Sinclair Broadcast Group, Inc.
- Company Name
- Sinclair Broadcast Group, Inc.
- Stock Symbol
- Class Period
- February 22, 2017 to July 19, 2018
- Motion Deadline
- October 8, 2018
- District of Maryland
The complaint charges Sinclair and certain of its officers with violations of the Securities Exchange Act of 1934. Sinclair is the largest television station operator in the United States by both number of stations and total coverage. The Company owns more than 193 stations across the country, covering nearly 40% of American households. On May 8, 2017, Sinclair and Tribune Media Co. (“Tribune”) announced that they had entered into a definitive agreement under which Sinclair would acquire 100% of the issued and outstanding shares of Tribune for $43.50 per share, for an aggregate purchase price of approximately $3.9 billion.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or concealed adverse information involving Sinclair’s proposed merger with Tribune. According to the complaint, in order to consummate the merger and achieve approval from the Federal Communications Commission (“FCC”), defendants engaged in “sham” transactions with buyers connected with the Company and its controlling shareholders as part of the divestiture process in an effort to misleadingly convince regulators that Sinclair’s proposed merger was in compliance with FCC ownership rules and regulations. This misconduct was concealed from the investing public, causing Sinclair’s stock price to be artificially inflated to more than $43 per share during the Class Period.
On July 16, 2018, it was reported that FCC Chairman Ajit Pai was internally circulating a draft Hearing Designation Order (“HDO”) designating the Sinclair/Tribune merger proposal for a hearing in front of the FCC’s administrative law judge – a designation widely considered to be a death sentence for proposed mergers – because of “serious concerns” that “Sinclair’s actions here potentially involve deception.” On this news, the price of Sinclair common stock declined nearly 12% to close at $29.10 per share on July 16, 2018.
Then, after the markets closed on July 18, 2018, despite the Company’s effort to avoid a hearing by withdrawing the improper “sham” transactions that were part of the divestiture process, the FCC unanimously voted to send the proposed merger to a hearing. The FCC publicly released the final HDO on July 19, 2018, which stated that there was “a substantial and material question of fact as to whether Sinclair affirmatively misrepresented or omitted material facts” regarding whether it had “attempted to skirt the [FCC]’s broadcast ownership rules.” As a result of this news, the price of Sinclair stock dropped 4%, or $1.10 per share, on July 19, 2018.
Subsequently, on August 9, 2018, in an emailed statement, Tribune announced its withdrawal from the $3.9 billion merger and said that it had filed a lawsuit in the Delaware Chancery Court against Sinclair seeking $1 billion in damages for losses incurred as a result of Sinclair’s “material breaches” of the merger agreement.