Streaming service ‘Netflix’ sued by investors over loss of subscribers

Netflix shareholders were misled about the drop in the number of subscribers over a span of six months, between 2022 and 2021, which led to a drop in the stock price for the streaming giant.

A lawsuit which was filed on Tuesday, May 3, 2022, in a federal court in San Francisco, USA, by the shareholders, has alleged that Netflix violated the USA securities law, by making materially false and misleading statements, and failed to disclose materially adverse facts about the company’s business, operation and prospects.

In April, the company reported a loss of two hundred thousand subscribers in the firs quarter of 2022, with a forecast of a decline of as much as twpo million subscribers in the second quarter.

This lawsuit which is seeking a representative action is demanding an unspecified amount in monetary damages for the investors that owned Netflix shares between October 19, 2021, and April 19, 2022.

These damages will include “compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon.”

The company suffered its largest one-day dip on April 20, 2022, just a day after reporting that the subscriber numbers are weaker than expected, dropping as low as 35%, losing $54 billion in market capitalization.

The lawsuit also alleges that Netflix employed underhanded, deceptive tactics to defraud their investors while withholding vital but non-public information, stating “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,”

According to the lawsuit, Netflix misled the investors as far back as October of 2021 with the earning report when they conveniently withheld that the company “was exhibiting slower [customer] acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services.”

And due to the “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,”

It is also reported that Netflix’s stock price dropped by 67% from a $691.69/share on November 17, 2021, to $226.19/share on April 20, 2022, closing at $204.01 a piece on Wednesday, May 4, 2022, according to Variety.