Netflix sued by shareholders for “misleading” information about growth

Investors in Netflix have filed a lawsuit against the company after accusing it of misinforming them about growth and its ability to keep attracting new subscribers. 

The lawsuit, which was filed in U.S. District Court in San Francisco, claims that Netflix originally estimated that it would gain an additional 2.5 million new subscribers, but it actually lost 200,000. 

Shareholders are asking for compensation for damages to cover the decline in Netflix’s share price, which has dropped by nearly 70% in the last six months. 

The suit reads: “Public documents and statements issued or disseminated in the name of the Company were materially false and/or misleading,” adding that Netflix  “knowingly and substantially participated” in presenting that message to the public. 

Executives have faced heavy criticism in recent months over their failure to admit to the company’s problems. Netflix lost 200,000 users in the first quarter of 2022, which is the first time it has lost subscribers in over a decade. 

Experts have put this drop down to increased competition, rising inflation, and price increases, and the claimants say the numbers are continuing to dwindle. It’s currently projected that another 2 million subscribers will cancel their services in the second quarter. 

In a report, Tech expert Jared Newman commented: “Never mind the clear cause and effect on display here; Netflix argues that the bigger sources of its current woes are competition and password sharing. 

It plans to address the former with better content, and the latter with stricter countermeasures. People have a limited amount of money they’re willing to spend on streaming services, and each time the cost of Netflix increases, competing services, and password sharing starts to look like more compelling alternatives. 

The hard truth for Netflix is that it can’t keep raising prices without exacerbating those other issues. That may explain why the company doesn’t want to fixate on those price hikes too much.”