Netflix Faces Shareholder Class Actions Over "Churn Rate" Numbers

Authored by Mark Hefflinger on July 23, 2004 - 4:43am.

Los Angeles -- A number of law firms have announced the filing of shareholder class action lawsuits against online DVD rental firm Netflix, alleging the company misled investors by not disclosing accurate subscriber cancellation numbers. The lawsuits argue that Los Gatos, Calif.-based Netflix "consistently understated its subscriber churn rate," and "failed to disclose the number of subscriber cancellations… even as they repeatedly touted the large number of new subscribers being added." Following a recent earnings release that for the first time stated subscriber cancellations, the company's stock declined 38% in value, to $20 per share. The suit further states that Netflix executives sold approximately $13 million in Netflix shares when the stock was trading closer to $40 per share.
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