in Newswire Published on July 23, 2019

Netflix Hit with Securities Class Action Over Subscriber Growth Statements

Wallerstein v. Netflix, Inc. et al

Filed: July 22, 2019 ◆§ 5:19cv4195

Netflix and its CEO and CFO are the defendants in a class action filed over allegedly false and misleading statements pertaining to Q2 2019 subscriber growth that missed expectations.

Defendant(s)

Netflix, Inc.

Law(s)

The Securities Exchange Act of 1934

State(s)

California

Categories

Entertainment Securities

Netflix, CEO Reed Hastings and CFO Spencer Neumann are on the receiving end of a proposed class action lawsuit that looks to represent those who bought or otherwise acquired publicly traded securities in the digital content juggernaut between April 17 and July 17, 2019.

Filed in California’s Northern District, the lawsuit states that Netflix in the after-market hours of April 16, 2019 published a letter to shareholders about its financial results for the first quarter of 2019. The letter, the suit says, included forecasts for the year’s second quarter and discussed both recent price increases for Netflix subscriptions and the scheduling of the release of some of the content provider’s “strongest original programming.”

During a subsequent earnings call held on the same day, Neumann discussed anticipation of subscription rates for the second quarter of 2019, the lawsuit says. According to the suit, the Neumann bullet-pointed Netflix’s focus on growing subscribers internationally, and noted that the company’s subscriber growth was “consistent” despite some “temporary churn” as price changes were rolled out. Later in the call arose the topic of the types of programming Netflix provides, on which Neumann stated, in part:

“But generally, I would say things are going as expected. And this is one of those relatively infrequent moments where as we invest more in the service, more great content, we got incredible movies coming like Irishman, Six Underground, improving the product experience, we occasionally go back to our subscribers and ask them to contribute a little bit more so that we can fund that next cycle of growth. And everything that we’re seeing right now is very consistent with that model."

According to the lawsuit, statements made by the defendants in the April 16 shareholder letter and on the earnings call were “materially false and/or misleading” in that certain adverse facts concerning Netflix’s business were misrepresented or undisclosed. The complaint alleges Netflix and its top officers failed to disclose that:

- The company would not be able to hit its target number of new subscribers in 2019’s second quarter; and that

- Netflix would also lose subscribers in the United States during Q2 2019.

Nearly three months to the day after the April earnings discussion, Netflix, the lawsuit says, revealed in a letter to shareholders that it expected to miss its target number for new subscribers, and actually lost 126,000 subscribers in the United States during Q2 2019. The release of this news saw Netflix’s stock price sink more than 13 percent per share, the case says.

Case Spotlight

Depo-Provera Lawsuits

Anyone who received Depo-Provera or Depo-Provera SubQ injections and has been diagnosed with meningioma, a type of brain tumor, may be able to take legal action.

How Do I Join a Class Action Lawsuit?

Did you know there's usually nothing you need to do to join, sign up for, or add your name to new class action lawsuits when they're initially filed?

Read more here: How Do I Join a Class Action Lawsuit?