This week, Netflix shareholders filed a lawsuit in a California court, accusing the company of misleading the market in terms of ensuring the growth of paying users in the past few months. The lawsuit, filed in San Francisco Federal Court on Tuesday, seeks compensation for Netflix's share price decline this year. Previously, the company's quarterly results were far worse than expected in terms of the growth in the number of paying users.
The lawsuit, filed by an investment trust company in Texas, accused Netflix and its executives of failing to correctly explain that Netflix's growth is slowing and there is a net loss of paying users in an increasingly competitive market.
Netflix shares fell 20% in January after disclosing weak growth in the number of paying users. On April 20, the company's share price plunged more than 35% to $226.19. The previous quarterly financial report showed that the number of paying users decreased by 200000 in the first quarter, far from the increase of 2.5 million expected by the market.
Netflix attributed the decline in quarterly performance to inflation, competition from other video platforms, and the suspension of business in Russia after the conflict between Russia and Ukraine, resulting in the loss of 700000 paying users.
A Netflix spokesman has yet to respond to the lawsuit.
The lawsuit also mentioned reed Hastings and Ted sarandos, Netflix's co chief executives, and Spencer Neumann, chief financial officer. The lawsuit requires Netflix to compensate investors who traded the company's shares between October 19, 2021 and April 19, 2022.
