Netflix Hit With 2nd Federal Securities Fraud Class-Action Complaint

Disclosures in an April 19 earnings report that Netflix lost 200,000 subscribers in Q1, sending the stock plunging more than 35% in a single day, sparked at least the second federal securities fraud complaint against the streaming company seeking class-action status (see 2205040004). The Cleveland Bakers and Teamsters Pension Fund, a Netflix shareholder, “suffered damages as a result of the federal securities law violations and false and misleading statements and material omissions” made by co-CEOs Reed Hastings and Ted Sarandos, Chief Financial Officer Spencer Neumann and Chief Product Officer Greg Peters, alleged the complaint in U.S. District Court in San Jose that was filed Tuesday and transferred to Oakland Thursday after U.S. District Judge James Donato recused himself. In at least five quarterly earnings calls before April 19, the Netflix executives failed to disclose to investors that subscriber account-sharing and increased competition from other streaming services “were becoming significant headwinds” and that the company was “experiencing difficulties retaining customers,” the complaint said. Netflix didn’t respond to requests for comment.