Shareholders of Netflix suffered a second disappointment recently when a judge refused to allow their shareholder lawsuit to proceed, because they had not fixed deficiencies that had been found in an earlier version of the lawsuit.
Through the lawsuit, shareholders are trying to get the company to pay them damages for misleading them about the financial prospects of its streaming operations. However, a judge in San Francisco has dismissed the lawsuit again.
The lawsuit had been led by the Arkansas Teacher Retirement System and State-Boston Retirement System. This is the second time the judge has found severe deficiencies in the lawsuit. This time round, the judge has also ruled that the lawsuit will not be filed a third time.
The lawsuit was kicked off in January 2012 soon after Netflix suffered very heavy subscriber losses that led to a dramatic plunge in its shareholder prices. Shareholders suffered heavy losses as a result. The company’s share price fell a staggering 76% between July and late October 2011.
Shareholders filed a lawsuit alleging that Netflix had withheld important inaccurate financial information that would have revealed the truth about the feasibility of streaming operations. The shareholder lawsuit also alleged that the company had falsely touted or promoted the feasibility of the streaming operations.
However, the judge has found no evidence in the lawsuit that the company had done anything of the sort. In the lawsuit, the shareholders also accused the company of misleading them about the profitability of its streaming as well as DVD businesses, and pricing trends. At the same time, according to the lawsuit, company insiders like the Chief Executive sold millions of dollars in company stock, and made substantial profit.