New Troubles For Netflix A Class-action Lawsuit
Netflix on Monday has been hit with a class-action lawsuit by a San Diego law firm, which accused the company's top executives of misleading investors about the company's financial condition while enriching themselves. The suit, filed by Geller Rudman & Dowd, alleges that the company's officers and directors hid from investors the fact that content providers on whom Netflix depended for newer movies and television shows were planning to raise their fees substantially, thereby requiring an increase in subscription rates, forcing the company to drop much of its most appealing content, and dashing the company's fiscal earnings forecasts. By hiding that information, the suit alleges, Netflix shares were able to rise exponentially, hitting a high of nearly $300 a share in July, 2011. At the same time, the lawsuit claims, Netflix executives were selling more than 388,000 of their shares for more than $90 million. In October, after the subscription rate was hiked, Netflix subscribers fled by the hundreds of thousands, causing shares in the company to fall more than 75 percent. The lawsuit seeks to recover unspecified damages for investors who purchased Netflix stock from December 20, 2010 to October 24, 2011.