What you need to know
- Netflix is being sued over recent subscriber losses and falling share prices.
- A recent earnings call confirmed a 200,000-subscriber loss.
- Share prices fell 35% following the news of the reduction in subscriber numbers.
A Netflix shareholder is suing the company for claimed securities law violations relating to the streamer's falling subscriber count and the subsequent drop in share price.
A suit was filed U.S. District Court in the Northern District of California by Imperium Irrevocable Trust with the aim being to seek class action status. Anyone who owned Netflix shares between October 19, 2021, and April 19, 2022 can get involved, writes Deadline. Co-CEOs Reed Hastings and Ted Sarandos and CFO Spencer Neuman are named as defendants.
The issue stems from recent confirmation that Netflix lost 200,000 subscribers at a time where it has historically added to that number. The streamer has since been cutting shows in an attempt to reduce costs, but the damage has already been done to the share price. The new lawsuit alleges that Netflix didn't tell its shareholders how bad the situation was soon enough. The loss of 200,000 subscribers caused a 35% reduction in share price the next day, causing people to lose a ton of money in the process.
"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."
As Deadline points out however, these kinds of lawsuits do need to meet a high bar in order to proceed. But even if this one gets struck down early on, it's another problem that beleaguered Netflix bosses could very much do without. The company is already working to try to claw back as much money as it can — it's aware that a worryingly high percentage of people share passwords with family members, meaning they don't need to pay for a subscription of their own.
