The shareholders say that Netflix indicated its subscriber-base would increase by 2.5 million users. In reality, it dropped by more than 200,000 users.
Shareholders have filed a lawsuit against Netflix, alleging that the streaming platform misled investors about its continued ability to attract new subscribers.
According to Reuters, the lawsuit was filed in a San Francisco federal court on Tuesday.
The shareholders are seeking damages for declines in Netflix stock after the company missed its subscriber growth targets.
Reuters notes that the case was field by a Texas-based trust, which accuses the California company of failing to disclose that its subscription numbers were stagnant.
The lawsuit claims that Netflix made “materially false and/or misleading statements” about its operations, refusing to disclose that it “was exhibiting slower acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services.”
Netflix shares, says Reuters, dropped 20% in January after it disclosed its weak growth; they then plunged a further 35% in April, after the company admitted that it had lost 200,000 subscribers in the first quarter.
The loss fell far short of Netflix’s own optimistic predictions, which presumed that the platform would add an estimated 2.5 million subscribers in the same span of time.
The lawsuit claims that Netflix made “materially false and/or misleading statements” about its operations, refusing to disclose that it “was exhibiting slower acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services.”
“As a result of these materially false and/or misleading statements, and/or failures to disclose, Netflix’s securities traded at artificially inflated prices during the Class Period,” the complaint says. “Plaintiff and other members of the Class purchased or otherwise acquired Netflix’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Netflix, and have been damaged thereby.”
Netflix tried to attribute its poor performance to inflation, increased competition, and its decision to suspend operations in Russia after the country invaded Ukraine.
Suspending services in Ukraine, said Netflix, cost the company about 700,000 subscribers.
The lawsuit says that, as a result of 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.”
Variety observes that, between October 2021 and April of 2022, Netflix shares decreased in value from a high of $691.69 per share on November 17, 2021, to $226.19 per share on April 20, 2022.
The company’s shares recently closed at just over $200.
The case is listed as Piriani v. Netflix Inc. et al., with docket number 22-CV-02672 in United States District Court for the Northern District of California.
The lawsuit was field by Glancy Prongray & Murray, a law firm specializing in class action lawsuits involving securities fraud.
Sources
Netflix faces lawsuit from shareholders after subscriber losses
Netflix Hit With Shareholder Lawsuit After Disclosing Subscriber Loss
Netflix Targeted With Shareholder Lawsuit Alleging Securities Fraud After Subscriber Miss
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