Netflix shares slumped in the stock market when it revealed that it was losing customers.
While speaking to shareholders, Netflix had announced that it had added only 2.7 million subscribers in the second quarter. Shares of Netflix slumped almost 13 percent immediately.
Now it is facing a lawsuit over the announcement from the company.
Johan Wallerstein has sued Netflix authorities over the statements made by the company heads. A case has been filed against CEO Reed Hastings and the company’s CFO Spencer Newmann on statements made by them, last week. The case has been registered at the California federal court.
Newmann has stated that there is a temporary churn in the system from the price changes. “The overall performance in the second quarter is quite healthy with strong and consistent growth, keeping us on track”, adds Newmann.
The case represented by Laurence Rosen, says that the statements made were misleading and materially false. The top executives have acted, knowing that the statements were misleading and untrue, as they had knowledge about the missed projections.
The case points to a letter delivered to shareholders on April 16 saying that the company had projected addition to its net shareholders by about 5 million. Further, it had stated that a price increase through the streaming services was an expected response. Net additions through international paid subscribers had been only 2.8 million instead of the forecasted 4.7 million.
Netflix has lost subscribers in the first quarter. It has lost new hit content and important shows like The Office and Friends. Further, it faces heavy competition from other rival streamers like Disney, Apple, and others. Subscriber growth is the most important criteria that show the growth of streaming services.
One reason for the miss on second-quarter expectation on U.S. subscribers is the hike in the standard plan to $13 from $11, says the letter to shareholders.
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