The production company behind the hit series The Chosen, 5&2 Studios, is currently facing a class-action lawsuit from former shareholders who allege they were unfairly “squeezed out” of their investments. The legal challenge, which follows the studio’s move to privatize, has prompted a firm denial of wrongdoing from series creator and co-founder Dallas Jenkins.
The Core of the Dispute: Privatization and Reverse Splits
In 2018 and 2019, The Chosen pioneered a unique model of equity crowdfunding, allowing approximately 16,000 individuals to invest in the project and finance its first season. However, as the production company grew, it faced the administrative and financial burdens associated with being an SEC-reporting public company, which the firm estimated cost roughly $3.7 million annually.
To streamline operations, 5&2 Studios initiated a two-step privatization process. This included a reverse stock split, through which the studio bought back minority shares at a rate of $3.75 per share. Plaintiffs in the lawsuit argue that this price was a “small fraction” of the company’s actual value, particularly in light of its strong financial performance in 2025 and the anticipated revenue from the final two seasons of the series.
Allegations of Investor Exclusion
The lawsuit, spearheaded by minority shareholder Christopher Garabedian, levels several accusations against the company’s leadership:
- Timing of the Vote: The plaintiffs allege that the vote regarding the reverse stock split was held during Holy Week—a period when many of the show’s faith-based investors were likely occupied—resulting in roughly 80% of minority shareholders failing to cast a vote.
- Use of Funds: The complaint claims that the company utilized funds originally intended for the production of the show’s final season to facilitate the cash-out of these investors.
- Nonprofit Involvement: According to the suit, the Come and See Foundation, a nonprofit entity that owns the intellectual property of The Chosen, loaned 5&2 Studios approximately $24.7 million to pay off the Series B stockholders during the transition.
The lawsuit contends that while the reverse split may not be inherently unlawful, the process violated Delaware corporate law by failing to provide stockholders with “fair value” for their shares.
Dallas Jenkins’ Response
In a public statement, Dallas Jenkins categorically rejected the allegations, defending the transparency of the studio’s actions.
“We’ve been transparent and accountable from the moment we formed our company and have gone above and beyond to follow all legal and financial requirements,” Jenkins stated. “Any suggestion of impropriety is categorically false, and the full record thoroughly addresses every concern. We’re eager for the court’s review to affirm that”.
Before the privatization move, Jenkins had communicated to investors that the studio worked with independent entities like Goldman Sachs and Moelis & Company to undergo a rigorous valuation and bidding process to ensure the share price was “generous and fair”. He emphasized that prior to this, the company had successfully returned 120% of initial investments to shareholders via dividend payments in 2022.
Context: A History of Legal and Structural Shifts
This lawsuit is the latest in a series of complex transitions for The Chosen. In 2024, the studio famously terminated its distribution agreement with Angel Studios following a dispute that was resolved through private arbitration, which Jenkins noted “comprehensively affirmed” the studio’s position regarding contractual breaches.
Following the split from Angel Studios, 5&2 Studios shifted its focus to independent production and new distribution partnerships. 5&2 Studios is scheduled to file a motion to dismiss the current shareholder lawsuit, along with an opening brief, by the end of August 2026.
Leave a Reply