Netflix shareholders are suing the company for losing subscribers.
According to Variety, the online streaming giant has been hit by a lawsuit from its shareholders who claim Netflix misled them about the extent of its recent subscriber losses.
The lawsuit, filed in federal district court in San Francisco on Tuesday, May 3, 2022, alleges that Netflix violated U.S. security laws by making “materially false and/or misleading statements” to its shareholders. It also alleges that Netflix “has not disclosed any material adverse facts about the company’s business, operations and prospects.”
Netflix lost a staggering 200,000 subscribers in the first three months of 2020 and has reportedly since responded to those massive dips with targeted cuts in its animation division and shut down its TUDUM media company — an online editorial website that only operated for several months.
It also began cracking down on password sharing in hopes of increasing subscribers by restricting the ability to share Netflix accounts.
The lawsuit, which is seeking class-action status, seeks unspecified monetary damages on behalf of investors who owned Netflix stock between October 19, 2021 and April 19, 2022.
The damages claimed include “amounts to be awarded to Plaintiff and the other Group Members, jointly and severally against all Defendants, for all damages incurred as a result of Defendants’ wrongdoing, to an amount to be proved in court, including interest thereon.”
Netflix shares plunged 35.1 percent overnight after reports of subscriber losses, losing $54.3 billion overnight. This is the biggest one-day drop in Netflix history.
Meanwhile, the lawsuit alleges that Netflix and its top executives “have used devices, schemes and devices to defraud [investors]while in possession of material adverse non-public information”.
The lawsuit also alleges that Netflix “falsely stated and/or failed to disclose material facts necessary to support the statements about Netflix and its operations and future prospects, given the circumstances under which they were made.” not to make misleading.”
Upcoming new Netflix movies in 2022
Claims that Netflix covered up its losses date back to the company’s third-quarter earnings report in October 2021. Shareholders claim they weren’t notified of Netflix’s declining subscriptions.
“Netflix showed slower [customer] Acquisition growth due in part to customer account sharing and increased competition from other streaming services,” the lawsuit reads.
They claim to have suffered “significant losses and damages” in the wake of Netflix’s “wrongful acts and omissions” and the precipitous decline in the market value of the company’s securities.
Netflix’s stock price fell a staggering 67% during the period affected by the lawsuit — from $691.69/share on November 17, 2021 to just $226.19/share on April 20, 2022.
The Pirani v. Netflix Inc et al. was filed in the United States District Court for the Northern District of California. The lead plaintiff in the lawsuit is listed as Fiyyaz Pirani, a trustee of Imperium Irrevocable Trust, a Netflix shareholder. The lawsuit names Netflix, along with co-CEOs Reed Hastings and Ted Sarandos, and CFO Spencer Neumann as defendants.
Ryan Leston is an entertainment journalist and film critic for IGN. you can follow him Twitter.