A shareholder complaint has reportedly been filed against Netflix Inc. in a California court, accusing the streaming giant of deceiving the market about its potential to continue growing members in recent months. The lawsuit, which was filed in San Francisco’s federal court, seeks compensation for losses in Netflix's stock price this year due to the company's failure to reach subscriber growth expectations.

Filed by Texas investment trust, the complaint accused Netflix and its chief executives, who did not disclose that the company is losing its customers and seeing a decline in growth as well.

For those unaware, Netflix has reportedly dropped 20% of its shares in January after the company revealed dismal subscriber growth. Netflix's share price dropped more than 35% to USD 226.19 on April 20 after the company announced it had lost 200,000 customers in the first quarter, far short of its target of achieving 2.5 million subscribers.

However, the firm completely blamed the drop on inflation, competition from rival streaming services, and the suspension of service in Russia following the invasion of Ukraine, which has cost the business 700,000 subscribers.

Netflix Co-Chief Executives Ted Sarandos and Reed Hastings, as well as Chief Financial Officer Neumann Spencer, are named in the lawsuit. Along with this, investors who exchanged shares of the company between Oct 19, 2021, and April 19, 2022, are also being sued.

Though shareholder lawsuits are common in practice, they have a high bar to clear This is just the latest difficulty for Netflix, whose lower-than-expected membership figures have recently put not only the streaming leader but the whole DTC sector, under a tough situation.

According to the complaint, the plaintiffs suffered substantial losses and damages because Netflix failed to disclose material adverse information in time.

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https://money.usnews.com/investing/news/articles/2022-05-04/netflix-shareholders-sue-over-subscription-slump-disclosures