Netflix wins investor lawsuit

Netflix Inc (NASDAQ: NFLX) successfully defended itself against a lawsuit accusing the company of failing to fully disclose the impact of account sharing on its growth. The lawsuit, filed by a Texas investment trust, seeks damages for investors who purchased Netflix stock between January 2021 and April 2022. Shares plunged by a third after the company reported its first subscriber decline in a decade.

U.S. District Judge Jon Tigar, who is presiding over the case in federal court in California, ruled Friday that the plaintiffs did not provide enough evidence to prove that Netflix knew about the alleged account-sharing issues within the timeframe requested by investors. Judge Tigar gave the plaintiffs the opportunity to amend their lawsuit and provide additional facts to support their allegations.

The decline in Netflix’s market capitalization began in January 2022 after warnings of sluggish subscriber growth and intensified in April, when the company revealed that challenges such as account sharing and increased competition were affecting new sign-ups. During this period, Netflix’s value has almost halved. Then-CEO Reed Hastings attributed part of the difficulty in predicting enrollment trends to the unpredictability caused by the COVID-19 pandemic.

As of noon on Monday, Netflix shares were up, trading at $479.09, an increase of 1.1%. Netflix and lawyers representing the investment trusts did not immediately comment on the court’s ruling. The news comes as the company continues to navigate the competitive streaming space, where account sharing practices and increasing competition pose ongoing challenges.

Reuters contributed to this article.

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