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Shareholder Sues Netflix for Hiding Information on Adverse Business Prospects

A Netflix shareholder has filed a class action suit against the streamer for withholding information about the company’s business prospects and thus causing significant losses for its shareholders.


The lawsuit claims that Netflix violated the federal securities law by failing to intimate details of low acquisition of subscribers during the period of October 2021 to April 2022. The class action suit has been filed “on behalf of all others similarly situated” who lost money within the specified time period.

This lawsuit comes a few weeks after Netflix announced that it had lost 200,000 subscribers in the the first quarter of 2022, and forecast an additional loss of 2 million subscribers in the ongoing second quarter.

Complainant Fiyyaz Pirani has argued that Netflix “failed to disclose material adverse facts about the Company’s business, operations, and prospects.”

He claims that the streamer failed to disclose the following information: (1) Netflix was exhibiting slower acquisition growth due to, among other things, account sharing by customers and increased competition from other streaming services; (2) the company was experiencing difficulties retaining customers; (3) as a result, the company was losing subscribers on a net basis; (4) consequently, the company’s financial results were being adversely affected; and (5) that, as a result of all this, Netflix’s positive statements about the company’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.

The suit noted that in January 2022, Netflix admitted to over-forecasting its subscriber acquisition, and attributed this to the Covid-19 pandemic-induced boost in subscribers. The next day, the company’s stocks fell by around 22%.

It further added that the forecast of an additional loss of 2 million subscribers plunged Netflix’s shares by over 35%.

The suit claims that the positive statements about the company in the market made the shareholders invest in Netflix under false pretences.


Meanwhile, the streamer’s downhill performance has sent ripples across the company with content-slashing and laying-off of employees.

At the last quarterly meeting, the company’s leadership announced that their priority was to tackle the menace of password sharing.

In addition to its subscriber base of 222 million households, Netflix estimates that 100 million additional households are using the service through the means of shared passwords. As a result, in March, Netflix had rolled out tests in Costa Rica, Chile, and Peru to find out if users would be willing to pay extra to share their accounts with non-subscribers, or people beyond their households.

Netflix’s leadership further revealed that they are considering introducing low-priced ad-supported plans in the next couple of years.