Andre Yoskowitz
17 Jan 2012 19:09
Netflix is now facing a class action lawsuit in California from investors who allege that the streaming giant misled its shareholders while cashing in their own stock.
Senior executives are accused "of issuing materially false and misleading statements regarding the company's business practices and its contracts with content providers" while at the same time cashing in $90 million worth of stock at "inflated prices." A few of the defendants named are chief executive Reed Hastings, finance director David Wells, chief content officer Ted Sarandos, chief product officer Neil Hunt and marketing director Leslie Kilgore.
Reads the lawsuit: "Defendants' statements about Netflix's ability to secure content and maintain profit margins were crucial to investors' evaluation of Netflix. Rather than fully disclose the devastating cost increases which were then threatening Netflix's entire business, defendants talked about its ability to grow. Specifically, defendants concealed negative trends in Netflix's business."
Netflix reached $305 a share during the summer, before falling to $63 in December in practically a straight line. Insiders managed to sell 388,000 shares at prices above $200. The shares closed today near $100.