Netflix Updates: A shareholder complaint has been filed against Netflix in a California court, accusing the streaming entertainment firm of deceiving the market about its potential to continue acquiring subscribers in recent months. The complaint, filed in federal court in San Francisco on Tuesday, demands damages for Netflix’s stock price reductions this year after the company missed its subscriber growth targets.
Netflix and its top executives were accused in a lawsuit filed by a Texas investment trust of failing to disclose that the company’s growth was slowing due to increased competition and that it was losing customers on a net basis. Netflix’s shares dropped 20% in January after the company announced disappointing subscriber growth.Netflix’s stock then plummeted more than 35% on April 20 to close at $226.19 (approximately Rs. 17,200) when the company announced it had lost 200,000 customers in the first quarter, far short of its target of 2.5 million. At lunchtime on Wednesday, its shares were trading at $199.87 (approximately Rs. 15,246).According to ‘Variety,’ Netflix deceived shareholders starting with its third quarter 2021 earnings report on October 19, when the company failed to disclose that “Netfli’x was exhibiting slower (customer) acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services.”According to the lawsuit, “Plaintiff and other Class members have suffered considerable losses and damages” as a result of Netflix’s “wrongful conduct and omissions, and the precipitous decrease in the market value of the Company’s stocks.”Netflix’s stock price declined 67% from a high of $691.69/share on November 17, 2021 to $226.19/share on April 20 over the time period covered by the case. The stock ended the day at $204.01 per share.Fiyyaz Pirani, a trustee of Imperium Irrevocable Trust, a Netfli’x stakeholder, is the principal plaintiff in the complaint. Netflix, as well as coCEOs Reed Hastings and Ted Sarandos, and CFO Spencer Neumann, are named as defendants in the lawsuit.Pirani v. Netfli’x Inc et al. is a case filed in the US District Court for the Northern District of California with the docket number 22CV02672. Glancy Prongay & Murray, which specialises in class action cases involving securities fraud accusations, is representing the plaintiffs.Netflix blamed the drop on inflation, competition from rival streaming services, and the suspension of service in Russia following Russia’s invasion of Ukraine, which cost the business 700,000 subscribers.A Netflix spokeswoman did not respond to a request for comment right away.Netflix coCEOs Reed Hastings and Ted Sarandos, as well as Chief Financial Officer Spencer Neumann, are named in the case. Investors who exchanged Netfli’x shares between October 19, 2021 and April 19, 2022 are being sued.Pirani v. Netfli’x et al., US District Court, Northern District of California, No. 22-cv-02672.
• Netflix’s co-chief executives and CFO are named in the lawsuit.
• Netflix’s stock dropped over 35% on April 20 to close at $226.19.
• The lawsuit seeks monetary compensation for investors.