Electrical Works Pension Fund, Local 103, I.B.E.W. v. Six Flags Entertainment Corporation

This is a securities class action filed on behalf of purchasers of Six Flags Entertainment Corporation (“Six Flags” or the “Company”) common stock between April 25, 2018 and February 19, 2020, inclusive (the “Class Period”). The case alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Six Flags and certain of the Company’s former senior executives (collectively, “Defendants”).

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and growth prospects related to its agreements with Riverside Investment Group Co. Ltd. (“Riverside”) to develop parks in China. As development of those parks began to face delays, Defendants misled investors by downplaying the problems as “short-term” and “not material in the context of the long-term opportunity.” Defendants also assured investors that Riverside was “work[ing] through” the macroeconomic issues in China and that Riverside was in “great shape” financially. In truth, Riverside was in severe financial distress and did not have the resources to timely complete its projects with Six Flags. As a result of Defendants’ misrepresentations, shares of Six Flags’ common stock traded at artificially inflated prices throughout the Class Period.

The truth emerged through a series of disclosures, beginning on February 14, 2019, when Six Flags announced a negative $15 million revenue adjustment for the fourth quarter of 2018 due to delays in the expected opening dates of some of its China parks, which the Company falsely blamed on macroeconomic issues in China.

Then, on October 23, 2019, Six Flags again postponed the timing of its park openings in China, stating “it’s unrealistic to think it’s going to be exactly as we’ve outlined.”

On January 10, 2020, the Company disclosed that the development of its Six Flags-branded parks in China continued to encounter challenges and had not progressed as expected, placing the future of its China parks in jeopardy. The Company also revealed that Riverside continued to face significant financial challenges, which caused Riverside to default on its payment obligations to Six Flags. As a result of these disclosures, the price of Six Flags common stock declined precipitously.

Finally, on February 20, 2020, the Company revealed that it had terminated its development agreements with Riverside because Riverside had defaulted on its payment obligations to the Company during 2019. The Company also stated that it is unlikely that Six Flags would recognize any revenue or income from the development of its Six Flags-branded parks in China, and provided a dismal earnings outlook for 2020, driven by significantly lower revenue contribution from Six Flags’ international development agreements. In response to these additional disclosures, the price of Six Flags’ common stock again dropped significantly.

On May 8, 2020, the Honorable Judge Mark Pittman appointed Bernstein Litowitz lead counsel, representing lead plaintiffs Oklahoma Firefighters Pension and Retirement System and Electrical Workers Pension Fund, Local 103, I.B.E.W. On July 2, 2020, Lead Plaintiff filed their amended complaint. On March 3, 2021, the Court granted Defendants’ motion to dismiss. On March 31, 2021, Lead Plaintiffs moved to set aside the judgment and for leave to amend the complaint. On July 26, 2021, the Court denied Lead Plaintiffs’ motion. Oklahoma Firefighters Pension and Retirement System appealed.

On January 18, 2023, the Fifth Circuit reversed the District Court’s grant of dismissal and remanded the case for further proceedings. In reversing, the Fifth Circuit credited Lead Plaintiffs’ confidential witness allegations and found that the alleged misstatements were materially false and misleading and Defendants’ statements about the progress of construction and the timing of opening were not entitled to Safe Harbor protection because they were either not forward looking, or not accompanied by cautionary language and were made with actual knowledge of their falsity. The Fifth Circuit’s ruling will take effect on February 9, 2023.