Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, announces that a class action lawsuit has been filed in the United States District Court for the Northern District of Texas on behalf of investors that purchased Six Flags Entertainment Corporation (NYSE:SIX) securities between April 25, 2018 and January 9, 2020 (the “Class Period”). Investors have until April 13, 2020 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
Click here to participate in the action.
On June 23, 2014, Six Flags announced the signing of an agreement to build multiple Six Flags-branded theme parks in China. Six Flags partnered exclusively with Riverside Investment Group Co. Ltd. (“Riverside”), a Chinese real estate developer, that would provide the capital investment for future developments in China. The Company emphasized expansion of its international licensing agreements as one of its key strategies to achieve revenue growth, and Six Flags’ agreements with Riverside to develop parks in China were of particular importance to investors because they represented the largest potential driver of growth in this strategic initiative. By May 29, 2018, Six Flags had announced plans with Riverside to develop 11 parks across three locations in China.
The complaint, filed on February 12, 2020, alleges that throughout the Class Period, defendants made materially false and misleading statements, as well as failed to disclose material adverse facts, regarding the Company’s business operations, and growth prospects. Specifically, defendants touted its business relationship with Riverside as an “incredible partnership” that “should supercharge revenue growth.” The Company also stated that Riverside would “work through” the macroeconomic issues that it faced in China and represented that delays in the development of its Six Flags-branded parks in China were “short term” and the resulting weakened revenue patterns were “not material in the context of the long term opportunity.” These and similar statements during the Class Period were false and misleading because defendants knew or recklessly disregarded that its licensing agreements with Riverside would not result in the benefits that defendants had publicly represented. As a result of these misrepresentations, shares of Six Flags’ common stock traded at artificially inflated prices during the Class Period.
The truth began to emerge on February 14, 2019, when the Company surprised investors by announcing a negative revenue adjustment of $15 million in the fourth quarter of 2018 related to the Company’s agreements with Riverside due to delays in the expected opening dates of some of the parks in China, which the Company blamed on macroeconomic issues in China. As a result, Six Flags reported a 38% decline in the Company’s sponsorship, international agreements and accommodations revenue compared to the fourth quarter of 2017. Six Flags also told investors that it expected weaker than anticipated quarterly revenue from its agreements with Riverside in 2019 and 2020.
On this news, the Company’s stock price dropped over 14%, from $63.87 per share to $54.87 per share.
On October 23, 2019, Six Flags again postponed the timing of its park openings in China, stating that “there’s a very high likelihood going forward that we will see changes in the timing of park openings” and “it’s unrealistic to think it’s going to be exactly as we’ve outlined.” As a result, the Company reported a 26% decline in sponsorship, international agreements and accommodations revenue for the third quarter of 2019 compared to the third quarter of 2018.
On this news, Six Flags’ stock price further declined from $51.23 per share to $44.88 per share, a decline of more than 12%.
Then, on January 10, 2020, the Company revealed that the future of its China projects was in jeopardy. In particular, the Company announced that the development of the Six Flags-branded parks in China continued to encounter challenges and had not progressed as expected. The Company also reported that Riverside continued to face significant challenges due to the macroeconomic environment and declining real estate market in China, which caused Riverside to default on its payment obligations to Six Flags. Furthermore, the Company told investors that, in the fourth quarter of 2019, it would realize no revenue from its agreements with Riverside and expected a negative $1 million revenue adjustment related to those agreements. The Company also announced one-time charges totaling approximately $10 million related to Riverside’s default.
On this news, Six Flags’ stock price fell again from $43.76 per share to $35.96 per share, or nearly 18%.
If you purchased Six Flags securities during the Class Period, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Melissa Fortunato or Marion Passmore by email at firstname.lastname@example.org, telephone at (646) 860-9156, or by filling out this contact form. There is no cost or obligation to you.
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