Netflix, Inc. (NASDAQ GS: NFLX – News)

Kahn Swick & Foti, LLC (“KSF”) and KSF partner, Former Attorney General of Louisiana, Charles C. Foti, Jr., announce the commencement of a securities class action lawsuit against Netflix, Inc. (“Netflix” or the “Company”) (NASDAQ GS: NFLX – News). KSF filed the lawsuit in the United States District Court for the Northern District of California on behalf of purchasers of Netflix common stock between July 22, 2014 and October 15, 2014 (inclusive; referred to as the “Class Period”), where KSF maintains an office led by KSF Partner, Ramzi Abadou (ramzi.abadou@ksfcounsel.com).

What You May Do

If you are a Netflix shareholder and would like to discuss your legal rights and how this case might affect you and your right to recover for your economic loss, you may, without obligation or cost to you, e-mail or call KSF Managing Partner, Lewis Kahn (lewis.kahn@ksfcounsel.com), or KSF Partner Ramzi Abadou (ramzi.abadou@ksfcounsel.com), toll free at 1-877-515-1850. If you wish to serve as a lead plaintiff in this class action by overseeing lead counsel with the goal of obtaining a fair and just resolution, you must request this position by application to the Court by May 1, 2017. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. KSF encourages both institutional and individual purchasers of Netflix to contact the firm. The ultimate resolution of any securities class action is strengthened through the involvement of aggrieved shareholders and lead plaintiffs who have large financial interests. KSF also encourages anyone with information regarding Netflix’s conduct during the period in question to contact the firm, including whistleblowers, former employees, shareholders and others.

About the Lawsuit

Netflix and certain of its officers and directors are charged with making a series of materially false and misleading statements and omissions related to the Company’s business and operations in violation of the Securities Exchange Act of 1934.  The allegations surround Netflix’s May 2014 price increase for monthly streaming subscriptions, and the Company’s failure to inform investors that – consistent with the Company’s prior experiences – the price increase could have a big, negative impact on subscriber growth.  Instead, on July 21, 2014 the Company representatives told the market that the price increase had a “minimal” and “nominal” impact on subscriber growth, further stating that any adverse effect on revenue was “background noise” which had “no noticeable effect in the business.”

Less than three months later, on October 15, 2014, and contrary to its earlier statements dismissing the “minimal” adverse impact, the Company revealed that the impact on earnings was hugely negative.  In fact, the subscriber growth numbers were so low that Netflix slashed its projected earnings by almost fifty percent.  In an explanatory letter to shareholders dated October 15, 2014, the Company stated, “[Y]ear on year net additions in the US were down (1.3 million in Q3 2013 to 1 million in Q3 2014). As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago. Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the US.”

As a result of the foregoing disclosure, Netflix stock plummeted by more than 19%, falling from a closing price of $448.59 per share on October 15, 2014 to a close of $361.70 per share on October 16, 2014.