Shareholder Sues Netflix For Violating Securities Law As Weak Subscriber Growth Tanked Stock

TV

A Netflix shareholder has sued the streamer for violating securities law after slowing subscriber growth led to a sharp decline in the company’s stock price.

The suit, filed U.S. District Court in the Northern District of California by Imperium Irrevocable Trust, seeks class action status “on behalf of all others similarly situated” who lost money – specifically whoever owned Netflix shares between Oct. 19, 2021, and April 19, 2022. It named Netflix, co-CEOs Reed Hastings and Ted Sarandos and CFO Spencer Neuman as defendants. (See full lawsuit below.)

Netflix declined comment.

Shareholder suits are common and face a high bar. But this one is the latest headache for the streaming leader, whose weaker-than-expected subscriber numbers recently have thrown not just Netflix but the entire DTC sector under a critical Wall Street glare. The stockholder alleges that Netflix “failed to disclose material adverse facts” in a timely manner, causing plaintiffs “significant losses and damages.”

On Jan 22, 2022, the suit notes, the company acknowledged over-forecasting fourth-quarter net adds and anticipating first-quarter adds would fall short of expectations. The stock fell 22% the next day.

Then last month, the streamer said it actually lost subs in the first quarter and expects to lose many more in the current second quarter — resulting a 35% plunge in the shares the next day.

“Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects,” the suit says.

“Specifically, Defendants failed to disclose to investors: (1) that Netflix was exhibiting slower acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services; (2) that the Company was experiencing difficulties retaining customers; (3) that, as a result of the foregoing, the Company was losing subscribers on a net basis; (4) that, as a result, the Company’s financial results were being adversely affected; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis. 8. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages.”

Netflix execs in January appeared puzzled by the slowdown. In April, they attributed the problem in large part to password sharing, and competition from rival streamers, and dropped into the middle of a Q&A that they were planning to start an ad-supported version — something the company had always disdained.

The suit claims that, before and during this period, “positive statements about the [its] business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.”

Plaintiffs are requesting a jury trial seeking unspecified compensatory damages, costs and expenses and “such other and further relief as the Court may deem just and proper.”

Read suit in full here.

Articles You May Like

Grey’s Anatomy Season 21 Episode 8 Review: Drop It Like It’s Hot
Quinta Brunson, Rob McElhenney Pull For Hometown Eagles In ‘Sunday Night Football’ Promo Ahead Of ‘Abbott Elementary’ & ‘It’s Always Sunny’ Crossover
Actor Paul Rodriguez’s Friend Dies in His Home, No Foul Play Suspected
‘The Diary Of A CEO’ Hits 1B Streams; Molly-Mae Lands Amazon Series; Jay Hunt Latest Chair Role – Global Briefs
‘Clarkson’s Farm’: Production Crew Set To Film UK Farmer Protest This Morning As Jeremy Clarkson Heads To London

Leave a Reply

Your email address will not be published. Required fields are marked *