Netflix share price continues to drop as multiple class action lawsuits emerge
A rough two weeks for Netflix has been capped off by news that at least two potential class action lawsuits against the company are in the works.
The Netflix Inc (All Sessions) share price collapsed 12% last week following the release of disappointing Q2 results.
Investors were quick to sell down the stock after it was revealed that the company gained just 2.7 million subscribers in the second quarter.
Indeed, when we reported on Netflix’s Q2 earnings, we noted that not only were these figures well below the corresponding 2018 quarter – but they were also some 46% lower than Netflix’s own subscriber growth estimates.
Things haven’t improved since then, with both the Rosen Law Firm and The Schall Law Firm gearing up for potential class action lawsuits against the streaming giant following the company’s steep share price declines.
‘False and misleading’ statements come into focus
The focal point of the potential class action lawsuits against Netflix centres on the allegation that the company made false and misleading statements to investors concerning subscriber growth.
Specifically, as part of a recent media release, Rosen Law Firm maintains that:
‘Netflix would not be able to gain its expected target number of new subscribers in the second quarter of 2019,’ and that ‘Netflix would also lose subscribers from the United States in the second quarter of 2019.’
Consequently, it is alleged that Netflix’s ‘public statements were materially false and misleading at all relevant times.’
Regardless of the truth of these allegations, it is true that once investors learned of Netflix’s significant miss in subscriber numbers, that the company’s share price did fall.
Since their Q2 earnings release, Netflix’s stock is down a sizeable 15.21%.
Or, as The Schall Law Firm phrased it:
‘When the market learned the truth about Netflix, investors suffered damages.’
What could these class action lawsuits mean?
Ultimately, it’s impossible to say what will come of these potential class action lawsuits against the streaming giant.
While investors have every right to be disappointed given the recent share price decline, whether that means Netflix Inc (All Sessions) made ‘false and misleading’ statements to the market and investors will be for the courts to decide.
In saying that, with one of the firms, Rosen Law Firm boasting an impressive track record, with recent settlements against Alibaba and Chrysler, and with ISS Securities ranking the firm number one for securities class action settlements in 2017 – it looks unlikely that this matter will simply go away.
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