Shareholders at Netflix are accusing the company of misleading them about the drop in subscribers and are now suing.
The lawsuit was filed in federal district court in San Francisco.
Investors accuse Netflix of violating U.S. securities laws by making “misleading statements” and failing to disclose facts about the company’s business.
The lawsuit, filed by investment trust Los Gatos, states Netflix did not disclose that it was losing subscribers on a net basis, while subscriber growth slowed down amid increasing competition.
Shares dropped as a result.
The lawsuit seeks damages for investors who traded shares between October of 2021 and April of 2022.
In April, Netflix reported that it lost 200,000 subscribers in its first quarter, making it the first time it lost subscribers in more than a decade.
The last time the company lost customers was in October of 2011.
Netflix estimates it may lose another 2 million subscribers in the second quarter.