CASES
Netflix, Inc,
Class Period: Dec 20, 2010 to Oct 24, 2011
Lead Plaintiff Deadline: Mar 13, 2012
Summary of Case:
A securities class action has been filed against Netflix, Inc. ("Nelffix" or the "Company") on behalf of all persons who purchased the common stock of Netflix between December 20, 2010 and October 24,2011, inclusive (the "Class Period"). This case has been filed in the USDC - California (Northern).
The Complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's business practices and its contracts with content providers. Specifically, defendants concealed negative trends in Netflix's business. As a result of defendants' false statements, Netflix's stock traded at artificially inflated prices during the Class Period, reaching a high of almost $300 per share on July 13, 2011. While Netflix stock was inflated (partially by Netflix buying back its own stock), Company insiders were selling 388,661 shares of their own Netflix stock for proceeds of $90.2 million.
On September 15, 2011, Netflix issued a press release announcing an update to its third quarter 2011 guidance. Netflix revealed that it had lost a million subscribers upon its price increases becoming effective. On this news, Netflix stock collapsed nearly $40 per share to close at just under $170 per share on September 15,2011, a one-day decline of nearly 19% on volume of 21 million shares. The stock fell further when defendants were forced to announce on September 19, 2011 that, in an effort to offset skyrocketing costs and rapidly defecting customers, the Company would begin charging separately for its two services and had raised prices as much as 60%. The streaming service would retain the Netflix name, while the DVD service would be renamed Qwikster. Netflix stock dropped to $130 per share on this news, a nearly 44% decline from early September 2011.
Then, on October 24,2011, Netflix issued its third quarter 2011 shareholder letter in which it reported anet loss of 810,000 U.S. subscribers, translating into a cumulative loss of 5.5 million subscribers. The subsequently filed Form 10-Q revealed that Netflix's obligations for content over the coming years had skyrocketed to $3.5 billion, with $2.8 billion due within three years.
These disclosures caused Netflix stock to collapse from $118.84 per share on October 24, 2011 to $80.86 per share on October 27, 2011, on volume of76 million shares over three days. The stock has continued to decline since that time.
If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.