US movie rental service Netflix is facing a lawsuit filed in California accusing execs of misleading investors about the declining fortunes of the company’s streaming business, whilst gaining $90 million (€71 million) in stock when shares were at their highest.
The class action lawsuit claims execs made “materially false and misleading statements regarding the company’s business practices and its contracts with content providers”. It claims the execs, including CEO Reed Hastings, finance director David Wells, chief content officer Ted Sarandos, chief product officer Neil Hunt and marketing director Leslie Kilgore, failed to disclose spiralling cost increases for content and the impact it would have on margins. “Specifically, defendants concealed trends in Netflix’s business,” the lawsuit claims.
The legal action also contends that insiders sold 388,661 shares for US$90.2 million when they were trading at “artificially inflated prices”. At their highest, shares were trading at US$300 before falling below US$90.
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