Just what a beaten down company needs… a class action lawsuit. When you have a boom to bust story like Netflix, Inc. (NASDAQ: NFLX). would you honestly expect there not to be any class action suits? The law firm of Izard Nobel LLP has announced that a lawsuit seeking class action status “has been filed in the United States District Court for the Northern District of California on behalf of purchasers of the common stock of Netflix between December 20, 2010 and October 24, 2011.
The Complaint alleges that Netflix and certain of its officers and directors violated federal securities laws. Specifically, defendants failed to disclose the following: (i) Netflix had short-term contracts with content providers and defendants were aware that the Company faced the choice of renegotiating the contracts in 2011 at much higher rates or not renewing them at all; (ii) content providers were already demanding much higher license fees, which would dramatically alter Netflix’s business; (iii) defendants recognized that Netflix’s pricing would have to dramatically increase to maintain profit margins given the streaming content costs they knew Netflix would soon be incurring; and (iv) Netflix was not on track to achieve the earnings forecasts for 2011.
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