This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Angry Netflix Investors Fight Back

NEW YORK ( TheStreet) -- Netflix (NFLX - Get Report) is being hit with a class-action suit by investors who claim the company withheld information prior to its infamous stock plunge late last year.

The suit, filed in U.S. District Court in Northern California, alleged that Netflix senior management -- including CEO Reed Hastings, Chief Content Officer Ted Sarandos, Chief Product Officer Neil Hunt and Chief Marketing Officer Kilgore - "issued materially false and misleading statements" regarding its ability to grow and minimized licensing fees.

The suit also noted\s that Netflix's senior managers sold off many of their shares when the stock was near its high of almost $300, which resulted in proceeds of $90.2 million among them.

Netflix's stock took a major hit in September following an announcement that the company lost more subscribers than expected following its price hike. This came around the same time Netflix said that discussions with Liberty Starz fell through to renew its streaming contract.

The stock fell further when the company announced the split of its streaming service and DVD business into two separate companies. Management later dropped plans for the division of the two services.

In October, Netflix announced it lost more around 800,000 subscribers in its third quarter, much more than anticipated. Shortly after, management warned the company would report a loss in several quarters of 2012 and later revised the outlook saying it will lose money for all of the year.

"At the beginning of the class period, Netflix was facing increasing competition for streaming business and content providers were exploring new ways to distribute their content and/or maximize their licensing fees, ... Rather than fully disclose the devastating cost increases which were then threatening Netflix's entire business, the defendants talked about their ability to grow," according to the suit, which was posted by Robbins, Geller, Rudman & Dowd LLP, the law firm handling the claims.

Shares of Netflix ended 2011 down more than 60% and 73% off their July high. But the stock has rebounded 30.6% in 2012, making it one of the best performing stocks on the S&P 500 so far this year.

Netflix declined request to comment on the case.

-Reported by Jeanine Poggi in New York.

Follow on Twitter and become a fan on Facebook.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
NFLX $414.77 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs