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Netflix to Face Class Action Lawsuit Over Plummeting Stocks

Netflix to Face Class Action Lawsuit Over Plummeting Stocks

Over the past few months, Netflix stock has been taking some huge blows, and now it looks as if things are going to get even worse for the home entertainment powerhouse.

After a recent 60% increase in subscription prices along with an aborted attempt to offshoot its DVD-by-mail service into a separate company called Qwikster, Netflix faced a largely dissatisfied customer base, resulting in a reported one million subscribers dropping the service in the last quarter alone. But just when it looked like things couldn’t get any worse, the company is now facing class action suit brought on by a group of its shareholders.

Filed in U.S. District Court for the Northern District of California, the suit claims that the video entertainment company has been giving false and misleading statements regarding its business practices and contracts with the studios that had been bolstering its share price.

Among the primary complaints brought about in the suit is the claim that “company insiders” were “concealing negative trends” shortly before the stock began to plummet. Around this time, Netflix executives sold 388,661 shares of their own stock when it was at its highest (due to artificial inflation), resulting in a net gain of $90.2 million.

“Later, when the defendants’ prior misrepresentations and fraudulent conduct became apparent to the market, the price of Netflix common stock fell precipitously, as the prior artificial inflation came out of the price over time,” the suit reads.

The plaintiffs of the lawsuit seek unspecified damages and attorney fees.

Kyle Moulder

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