Netflix is being sued by investors who claim the streaming giant misled them about subscriber growth in the six months before it reported a loss of 200,000 subscribers, leading to a plunge in stock price.
The lawsuit, which seeks class action status, was filed in San Francisco federal court on Tuesday alleging that Netflix violated U.S. securities laws by making ‘materially false and/or misleading statements’ and because it ‘failed to disclose material adverse facts about the company’s business, operations and prospects.’
The lead plaintiff ‘Pirani v. Netflix Inc et al’ is Fiyyaz Pirani, a trustee of Imperium Irrevocable Trust, which is a Netflix shareholder, is named in the lawsuit that seeks damages for declines in the company’s share price this year after the company missed its subscriber growth estimates.
Netflix shares dropped 20 percent in January after it disclosed weak subscriber growth and then shares plunged more than 35 percent on April 20 to close at $226.19 after it said it lost 200,000 subscribers in its first quarter.
The lawsuit was filed just days after it was reported by Deadline that Netflix had dropped Meghan Markle’s animated series as part of a wave of cutbacks prompted by the streaming service’s drop in subscribers.
Filed by a Texas-based investment trust, the lawsuit accused Los Gatos, California-based Netflix and its top executives of failing to disclose that its growth was slowing amid increased competition and that it was losing subscribers on a net basis.
The lawsuit seeks damages for investors who traded Netflix shares between October 19, 2021 and April 19, 2022 – which include ‘compensatory damages’ with an ‘amount to be proven at trial.’
Netflix has not responded to request for comment from DailyMail.com.
The lead plaintiff in the lawsuit ‘Pirani v. Netflix Inc et al’ is Fiyyaz Pirani, a trustee of Imperium Irrevocable Trust, which is a Netflix shareholder
Netflix is being sued by investors who claim the streaming giant misled them about subscriber growth in the six months before it reported a loss of 200,000 subscribers
Netflix opened at $200.44 on Thursday and by midday, shares were trading at $193.80
Netflix shares dropped 20 percent in January after it disclosed weak subscriber growth and then shares plunged more than 35 percent on April 20 to close at $226.19 after it said it lost 200,000 subscribers in its first quarter
The lawsuit names defendants as Netflix and co-CEOs Reed Hastings and Ted Sarandos and CFO Spencer Neumann.
According to the lawsuit, Netflix ’employed devices, schemes and artifices to defraud [investors], while in possession of material adverse non-public information.’
Netflix also made ‘untrue statements of material facts and/or omitting to state material facts necessary in order to make the statements made about Netflix and its business operations and future prospects in light of the circumstances under which they were made not misleading,’ the lawsuit alleges.
Because of Netflix’s ‘wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,’ the complaint states.
Netflix shares dropped 20 percent in January after it disclosed weak subscriber growth.
Netflix shares then plunged more than 35 percent on April 20 to close at $226.19 after it said it lost 200,000 subscribers in its first quarter, falling well short of its forecast of adding 2.5 million subscribers.
Netflix opened at $200.44 on Thursday morning and by midday, shares were trading at $193.80.
The company attributed the quarterly decline to inflation, competition from other streaming services and its suspension of service in Russia following the Russian invasion of Ukraine, which cost Netflix 700,000 members.
On Sunday, Deadline reported that Pearl, which was created by the Duchess of Sussex through Archewell Productions, was officially canceled.
Netflix dropped Meghan Markle’s animated series as part of a wave of cutbacks prompted by the streaming service’s drop in subscribers. Markle and Prince Harry are pictured at a track and field event at the Invictus Games in The Hague, Netherlands on April 17, 2022
Markle and Prince Harry established Archewell Productions in autumn 2020 in an effort to create scripted series, docuseries, documentaries, features and children’s programming. Pearl was expected to be the first animated series created by the production company.
Despite dropping Pearl, insiders claim Netflix remains optimistic about the Archewell deal and has a number of projects planned, including a documentary series called Heart of Invictus, which follows the recent Invictus Games.
Netflix has made several cuts in recent days, including dropping two other children’s shows and firing staff.
Last week, the streaming service scratched Dino Daycare, which was created by Jeff King, and the South Asian-inspired adventure Boons and Curses. Both shows were already in production.
Sources familiar with the cancellations told Deadline that Netflix had warned producers to take projects still in the development stage elsewhere. It is unclear if they offered Archewell Productions similar advice.
The streaming giant shelled out a $100million in the deal with the Duke and Duchess of Sussex in September 2020.
As of yet, the Duke and Duchess of Sussex are yet to produce any published content for the streaming giant. But the company has pinned hopes that their upcoming series documenting the recent Invictus Games will prove value for the money.
Prince Harry and Meghan Markle are pictured at the Invictus Games on April 17. They are working on a Netflix documentary series called Heart of Invictus, which follows the event
The streamer made many of the layoffs at Tudum, a website meant to market Netflix’s programs
Netflix also began firing staff after missing its subscriber target by 200,000 people and watching the value of its shares tank by 50 percent in a month.
The company made the layoffs at Tudum, a website filled with stories that are meant to market Netflix’s programs, it was revealed on Thursday. At least 10-15 staff tweeted about being fired, although the exact number dismissed remains unclear.
The site, named as an onomatopoeia for the sound you hear when a Netflix show begins, was meant to allow subscribers insider access to the company’s shows.
Netflix refused to tell the Los Angeles Times how many jobs were cut, merely saying ‘our fan website Tudum is an important priority for the company.’
Some of those laid off took to Twitter, saying that the company had only hired them months earlier.
Elon Musk blames ‘the woke mind virus’ for making Netflix ‘unwatchable’ after it lost 200,000 subscribers
There have been several hypotheses for why the streamer is losing eyeballs, with many including Tesla CEO (and potential future Twitter chief) Elon Musk blaming ‘the woke mind virus.’
Responding to a tweet about the subscription service’s devastating performance, Musk said: ‘The woke mind virus is making Netflix unwatchable.’
A follower then responded: ‘Woke mind virus is the biggest threat to the civilization.’
The world’s richest man replied to him: ‘Yes.’
Elon Musk has slammed ‘unwatchable’ Netflix, managed by CEO Reed Hastings (right) for becoming infected by the ‘woke mind virus’ as the streaming giant hemorrhages subscribers
Fans applauded Musk’s comments with some even urging him to take over Netflix after he concludes his Twitter deal.
Others, however, have suggested that the real problem is Netflix’s habit of canceling beloved shows before their time, angering fans.
Popular TV dramas like The OA, Marco Polo, and The Punisher are being cancelled by the service after series two – leaving fans furious and threatening to cancel their subscriptions because they no longer want to ‘invest their time in a series’ over fears it will be ‘culled’.
Meanwhile, over half of Netflix’s own reality TV shows and dramas released in 2018 have not been commissioned for a second series, compared with more than a third launched in 2017 and 28 percent in 2016, The Times reported.
It comes as the streaming behemoth has lost 200,000 subscribers in just three months, while shareholders of the US firm have been warned to expect another two million subscribers to leave in the three months to July.
Netflix are axing their own shows earlier than ever before and it’s thought to be one of the main reasons the platform is quickly losing subscribers, according to new analysis
Bosses say a second price-rise in a year has played a part, while the company has lost 700,000 following its decision to pull out of Russia in the wake of Vladimir Putin’s invasion of Ukraine.
Netflix said the Covid boom had ‘created a lot of noise’ and blamed the slowdown on the return to normality after two years of lockdowns.
It also blamed password sharing for the rise in cancelled accounts, as it estimated that about 10million households worldwide are watching its service for free by using the account of a friend or another family member.
The company has now started testing different ways of curbing password sharing in Chile, Costa Rica and Peru – and could extend this elsewhere if it proves successful. Bosses are also considering turning the service into a low-fee subscription supported by ads.
Netflix lost 200,000 in the first three months of this year and two million more a predicted to leave by the end of the year, leaving the company scrambling to be more appealing to a wider audience
Gwyneth Paltrow’s ‘sex-positive’ series Sex, Love & Goop (pictured), aimed to help couples learn methods to enhance their relationships through more pleasurable sex
The animated series for youngsters My Little Pony: A New Generation, featured topics such as prejudice and fascism
New Netflix show He’s Expecting depicts a man who becomes pregnant, with some viewers turning off at its ‘woke’ programming
Netflix also claimed that the market had now been ‘saturated’ by rising competition from streaming services including Disney+, Apple TV, Now TV, Warner Bros Discovery and Paramount, the cost-of-living crisis gripping the US, Canada and Western Europe, and its decision to quit streaming in Russia after Vladimir Putin’s invasion of Ukraine in February.
The rapid rise of rival Disney+, which has seen billions of dollars of investment in recent years, has seen competition in the streaming market increase dramatically.
And other services like Amazon Prime Video, which has captured a share of the live football market in the UK, and AppleTV+, which has seen success through football comedy Ted Lasso, have also seen people turn away from Netflix.
Despite the streaming service’s recent issues, there have been some successes, with dystopian Korean series Squid Game proving a huge hit, and season one of period drama Bridgerton taking the world by storm.
However, fan favorites such as Bloodline and Jessica Jones were cancelled after their third season, leaving viewers frustrated and ‘tired of starting something new only for it to be cancelled two years later’.