Netflix Being Sued By It’s Own Investors
January 18, 2012 8 Comments
Is Netflix falling apart and crumbling?
Add this to the growing list of Netflix’s woes: It’s getting sued
As it struggles with a weakened stock and battered public perception, Netflix now finds itself the subject of a class-action lawsuit in California. A group of investors filed the suit in U.S. District Court “against Netflix and certain of its officers and/or directors”, contending that “company insiders” at Netflix were “conceal[ing] negative trends” that preceded the stock’s ultimate plummeting and selling NFLX stock while the stock was at that “artificially inflated” peak.
For background, on July 12, the day Netflix announced that it would split its DVD and streaming services, Netflix stock closed at a price of 291.27; on October 25, 2011, the final day of the class action lawsuit, the stock closed at 77.37. On Tuesday, Netflix was trading around the 97.00 mark.
Among the defendants named in the lawsuit are embattled Netflix CEO Reed Hastings; Chief Content Officer Ted Sarandos; and Chief Marketing Officer Leslie Kilgore. A summary of the accusation, from the lawsuit:
During the Class Period, defendants issued materially false and misleading statements regarding the Company’s business practices and its contracts with content providers. Specifically, defendants concealed negative trends in Netflix’s business. As a result of defendants’ false statements, Netflix’s stock traded at artificially inflated prices during the Class Period, reaching a high of almost $300 per share on July 13, 2011. While Netflix stock was inflated (partially by Netflix buying back its own stock), Comapny insiders were selling 388,661 shares of their own Netflix stock for proceeds of $90.2 million.
Though Netflix has long been getting pilloried in the court of public opinion, with Internet commenters and message board denizens blasting the company for what they perceive as corporate greed, this is the first official legal thrust at the popular streaming-and-DVD service as a result of its sudden stock price drop. It had also been publicly noted that CEO Hastings was selling lots of his company’s stock, with many questioning why, though this lawsuit also marks the first legal criticism of his selling.
Hastings, for one, is taking a huge pay cut for 2012, with his stock options down to $1.5 million from $3 million. His base salary of $500,000 per year remains the same.
I am one of the many that discontinued the DVD portion of Netflix. I kept the streaming but am still waiting for them to increase selection which was promised and have yet to see…I will keep it for now but if they do not increase the selection will look at other options…however if they increase their prices again for any greedy reason I will cancel…
~~Corporate greed…seems to be what America has turned into. Let’s take something that was making money and was a great service for people. Double the price, break it up and make it harder to use….oh btw…the CEO completely messes up, doesn’t get fired, his stock options cut in half and GETS TO KEEP his original salary. If this had been a normal American worker, he/she would have been canned the first day! Even if they restored their service and price to what it was before, I would never return. Crash to the ground Hastings....you should be proud! You did this! Dumb jerk!!~~
oh and the picture of Hastings “How about I don’t say or do ANYTHING for the next year” is instant #CLASSIC lmao
that picture is funny because i’m sure he’s felt that way since making that dumb decision lol
Yesterday, some poor schmuck got fired from McD’s because he gave out three packets of ketchup, and his boss was in a mood.
Hastings nearly destroyed a company in a matter of months and is ony going to get 1.5 million in stock options (on top of a half million dollar salary).
Welcome to America. Move along, now. Nothing to see here, folks.
Netflix tried to screw us over and went about things the wrong way, i’ll agree on that part. But when you think about it. It’s still only $8 a month to get shows/movies streaming over the internet directly to your TV. I’ve canceled the DVD portion of my account but the streaming part is still a good deal.
@cynthia if the McDonalds story is true than that’s really sad
I still have it but if they raise the streaming price i’m oOUT
no more price increases please thank you