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Judge says Netflix ( NFLX ) did not mislead shareholders

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Plaintiff says Netflix ( NFLX ) hid impact of account sharing

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Netflix ( NFLX ) market cap slid $54 billion on subscriber decline

By Jonathan Stempel

Nov 26 (Reuters) - Netflix ( NFLX ) won the dismissal on

Tuesday of a shareholder lawsuit accusing the streaming company

of downplaying the impact on subscriber growth of account

sharing, where paying members share user names and passwords

with nonpaying members in other households.

The proposed class action led by a Texas-based trustee began

after Netflix ( NFLX ) revealed in April 2022 it had lost 200,000

subscribers in the prior quarter, the first decline in a decade,

and might lose 2 million more in the next three months.

Netflix ( NFLX ) blamed the decline on several factors, including

account sharing, rising competition and a shutdown of service in

Russia following the Ukraine invasion. Its shares fell 35% the

next day, wiping out more than $54 billion of market value.

U.S. District Judge Jon Tigar in Oakland, California,

however, said Netflix's ( NFLX ) earlier claims to be "roughly 60%

penetrated" in the United States and Canada with "a lot of

headroom" to grow were not false or misleading, because they

referred to paid subscribers and did not imply that growth was

certain.

He also found no proof Netflix ( NFLX ) concealed any determination

that account sharing would severely hinder growth.

"At most," he said, the plaintiff's allegations suggest that

the Los Gatos, California-based company investigated account

sharing and found it to be "one potential threat to growth among

many."

Lawyers for the plaintiff did not immediately respond to

requests for comment. Netflix ( NFLX ) and its lawyers did not

immediately respond to similar requests.

Tigar had dismissed an earlier version of the lawsuit in

January. Tuesday's dismissal was with prejudice, meaning the

plaintiff Fiyyaz Pirani, the trustee of Imperium Irrevocable

Trust, cannot amend his complaint again.

The case is Pirani v Netflix Inc ( NFLX ) et al, U.S. District Court,

Northern District of California, No. 22-02672.