NEED TO KNOW
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A federal lawsuit accuses Six Flags and its executives of misleading investors about park conditions prior to its $8 billion merger with competitor Cedar Fair in July 2024
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The complaint, filed on Nov. 5, claims the company “negligently prepared” a merger statement that was later approved by investors
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As a result, the suit claims investors suffered “hundreds of millions of dollars in economic loss”
A federal class-action lawsuit filed last week accuses Six Flags and its top executives of misleading investors about the state of its parks ahead of the July 2024 merger with Cedar Fair.
The $8 billion deal cemented the Six Flags Entertainment Corporation as the largest amusement park operator in North America.
A Nov. 5 complaint filed by the municipal pension fund of Livonia, Michigan, in the U.S. District Court of Northern Ohio, accuses the theme park company of filing a “negligently prepared” merger statement with the U.S. Securities and Exchange Commission (SEC).
The complaint claims they failed to disclose that legacy Six Flags parks “suffered from chronic underinvestment” and required “millions of dollars in additional capital and operational expenditures.” The complaint claims the company and executives included “inaccurate and misleading” information.
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“Legacy Six Flags had for years deferred or foregone basic park maintenance, operation improvements, infrastructure repairs, and ride design and development updates,” the complaint says.
The suit also names Selim Bassoul and Richard Zimmerman, the company’s former and current CEOs, respectively, as defendants.
“Bassoul slashed employee headcount in an effort to cut costs,” the complaint says, alleging doing so degraded the company’s “operation competence and guest experience.”
Instead, the complaint says investors were under the impression the company had made “transformational investments” into existing parks.
This suit is seeking class action status to represent all persons and entities who acquired Six Flags common stock prior to the merger. It seeks compensatory damages and legal fees for the “hundreds of millions of dollars in economic loss.”
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According to the suit, the company’s stock price was at $55 a share on the day of the merger. Following disappointing quarterly earnings reports in the months since, the price per share has dropped drastically. As of Nov. 12, shares are worth about $16, according to Yahoo! Finance.
Attorneys representing the City of Livonia Employees’ Retirement System did not immediately respond to PEOPLE’s request for comment.
Gary Rhodes, Six Flags’ corporate director of communications, declined to comment on the matter, citing pending litigation.
The suit came two days before Six Flags reported another disappointing quarter. In a Friday, Nov. 7 press release, Zimmerman explained the company “did not achieve the desired returns,” in the three-month period ending Sept. 28. Despite a 1% year-over-year attendance increase, Six Flags posted a $1.2 billion loss during those three months.
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Executive VP and CFO Brian Witherow said during the company’s earnings call that they need to be more “nimble and strategic in allocating invest dollars, focusing only on our highest potential underperforming parks.”
He later emphasized that getting their portfolio of parks smaller is a “priority,” emphasizing their ability to “monetize” and sell off parks to reduce debt.
On Sunday, Nov. 2, the company permanently closed its Six Flags America and Hurricane Harbor water park in Bowie, Md. The property first opened more than 50 years ago as a drive-thru safari park called The Wildlife Preserve. It was later rebranded to Six Flags in 1999.