Netflix Faces Lawsuits From Shareholders Over Q2 Shortcomings

Netflix continues to be in hot water over its recent second quarter subscriber shortcomings. After failing to meet subscriber estimates by a considerable margin, the streaming giant is now facing lawsuits from its shareholders.

Netflix reported to its shareholders last Wednesday that it had added 2.7 million subscribers in the second quarter of 2019, well beneath its projection of 5 million. This also represented their first net loss of members since 2011. Despite the company beating Wall Street's overall revenue projections, this prompted a 13 percent dip in the company’s stock price and, as of Monday, two lawsuits from its shareholders claiming that the company had not adequately disclosed information about these shortcomings per SEC regulations.

According to Variety, the suits were filed through the Rosen Law Firm and Schall Law Firm, the former on behalf of shareholder Johan Wallerstein, naming Netflix CEO Reed Hasting and CFO Spencer Neumann as defendants.

Per the suit through Rosen, Netflix “knew that the public documents and statements issued or disseminated in the name of the Company were materially false and misleading.” The company has not yet responded to these suits.

Variety notes that suits of this nature are commonplace and usually get filed a lot quicker. Typically, the company would dismiss the suits and motion for their dismissal. Barring that, the cases are usually settled.

Netflix pinned the blame for their low subscriber growth on a weaker second quarter slate of original content. The company expects to post a net gain of 800,000 subscribers in the third quarter.