Netflix recently announced their first decline in subscribers in over a decade. The company has been facing increasingly stiff competition from other streaming services such as Hulu, HBO Max, and Peacock. The massive drop in subscriptions has now led to a lawsuit.
Variety reports that shareholders filed suit in San Francisco on Tuesday. The legal action alleges that Netflix violated US securities law by making false or misleading statements. The lawsuit also alleges that the company failed to disclose adverse facts about the streaming giant’s business performance.
Netflix reported a loss of 200,000 subscribers in the first quarter of 2022. Forecasts predict an additional two million users dropping the service in the current quarter. The company blamed its decreased performance on password sharing.
Netflix has not offered any comment about the suit. Shareholders are attempting to gain class-action status for the suit, meaning individual stock purchasers can sign up to be represented. The lawsuit is seeking compensatory damages due to Netflix’s alleged wrongdoing.
Owners of Netflix stock saw sharp declines after the news broke. The previously successful security plunged 35% and saw a $54 billion decrease in market capitalization. The suit alleges that Netflix knew this was coming and failed to inform shareholders in a timely manner.
The hot water will only continue for Netflix until it eventually boils over. Shareholders are angry at the company’s leadership, performance, and lack of communication. This suit could prove incredibly costly if it is successful.
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