A Netflix shareholder is seeking class action status for a lawsuit accusing the streaming TV titan of failing to disclose that subscriber numbers were at risk.
A revealed drop of just 200,000 users — less than 0.1 percent of the total customer base — was enough to send stocks plummeting after Netflix released its quarterly results in April.
The company expects a much larger drop in the current quarter – from about two million net subscribers.
The lawsuit, filed Tuesday in federal court in San Francisco, accuses top executives at Netflix of failing to tell investors that subscriber growth is slowing due to people sharing accounts and increasing competition in the market.
“Defendants’ positive statements about the Company’s business, operations and prospects were materially inaccurate and/or misleading and/or lacked a reasonable basis,” reads the lawsuit filed by attorneys at Glancy Prongay & Murray on behalf of a shareholder.
Netflix did not immediately respond to a request for comment.
Executives at the company said during an earnings call that they are targeting the 100 million households who watch Netflix for free thanks to shared passwords.
“When we were growing fast, it wasn’t the top priority to work on,” admitted co-founder Reed Hastings. “And now we’re working super hard on it.”
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