Shareholders sue Netflix — Analysis
Netflix shareholders filed a lawsuit against the streaming service on Wednesday, accusing the company’s management of fraud by issuing misleading guidance about subscriber growth, leading to a plunge in its stock price.
San Francisco: The suit claims that the streaming company has not disclosed that it’s a legal entity. “losing subscribers on a net basis.” Unaware of Netflix’s inability to retain customers, the plaintiffs claim to “have suffered significant losses and damages.”
According to the investors, the downfall of the biggest streaming service is due to increased competition and account sharing from customers.
Netflix last month reported it has lost almost 200k subscribers in its first quarter and that it will lose 2 million more over the course of the year. As a result, within hours of trading the company’s shares dropped by 25%. Overall, Netflix’s capitalization has decreased by 40% this year.
This unprecedented collapse of the company’s value has forced Netflix’s executives to consider creating more affordable subscription tiers by adding a version of the streaming platform with ads.
On March 6, Netflix announced that it would leave the Russian market due to Moscow’s military action in Ukraine. While the company said it gained 500,000 new subscribers so far this year in other countries, the loss of Russia’s 700,000 subscribers has created significant problems for the American entertainment giant.
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