Netflix, which has lost subscribers for the first time in 11 years, has been sued for damages from shareholders who suffered losses due to the stock price plunge.
According to Reuters and others, shareholders, including an investment trust in Texas, have filed a class action lawsuit against the company and management, claiming that Netflix misleads investors by not disclosing subscriber-related information in a timely manner.
They filed a lawsuit in the San Francisco Federal Court for damages on behalf of all investors who traded in the company's stock from the third quarter of last year to the first quarter of this year.
In the complaint, shareholders allege that Netflix misled investors by not properly disclosing that subscriber growth was slowing due to account-sharing problems and fierce streaming competition when Netflix announced its third-quarter earnings last year.
"Netflix has made omissions or misrepresentations of facts necessary to avoid misleading the company's outlook," it said.
Netflix stock rose to $691.69 per share as of November 17 after the announcement of third-quarter earnings last year.
However, in regular trading the day after Q1 earnings were released, Netflix tumbled 67% from its November peak to $226.19.
Last month, Netflix announced that it had 200,000 fewer paid subscribers in the first quarter compared to the fourth quarter of last year.
Netflix subscribers declined for the first time since 2011.