Netflix has been slapped with a lawsuit for misleading shareholders about its declining subscriber growth.
The lawsuit, filed yesterday in San Francisco federal district court, alleges Netflix made “materially false and/or misleading statements” regarding subscriber drop off. In doing so, it “failed to disclose material adverse facts about the company’s business, operations and prospects.”
It claims Netflix “employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information” and made “untrue statements of material facts and/or omitting to state material facts necessary in order to make the statements made about Netflix and its business operations and future prospects in light of the circumstances under which they were made not misleading.”
The lawsuit claims Netflix misled shareholders when making its Q3 2021 earnings report in October, by failing to inform shareholders that “Netflix was exhibiting slower [customer] acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services.”
Netflix’s “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,” according to the complaint.
Netflix reported a net loss of 200,000 subscribers during the first three months of 2022, with a further two million expected to be shed during the current quarter.
The suit asks for “compensatory damages” on behalf of investors who owned Netflix shares between Oct. 19, 2021, and April 19, 2022. The lawsuit names Netflix, co-CEOs Reed Hastings and Ted Sarandos, and CFO Spencer Neumann as defendants.
Netflix’s stock price peaked at US$691 a share on November 17. By April 20, it has dropped 67 per cent to $226.19 a share.. This followed a 22 per cent drop on January 21 after released its Q4 2021 financials, and the historical 35 per cent fall on April 20, after reporting the falling subscribers.
US$54 million was wiped off the company’s value in one day.
