Is Netflix Guilty of Witholding Material Information from Investors Pre Stock Crash?

A group of unhappy shareholders recently filed a class-action lawsuit agains Netflix (NASDAQ:NFLX), alleging the online and rent-by-mail movie chain withheld information from them before its stock prices took a nosedive last summer and fall.

The U.S. District Court in Northern California filed the suit for the City of Royal Oak Retirement System, on behalf of “all plaintiffs similarly situated.”

“At the beginning of the class period, Netflix was facing increasing competition for streaming business and content providers were exploring new ways to distribute their content and/or maximize their licensing fees, … Rather than fully disclose the devastating cost increases which were then threatening Netflix’s entire business, the defendants talked about [their] ability to grow.”

Here’s how Netflix stock is reacting to the lawsuit:

Netflix, Inc. (NASDAQ:NFLX): NFLX shares recently traded at $96.58, up $2.2, or 2.33%. They have traded in a 52-week range of $74.25 to $304.79. Volume today was 5,018,680 shares versus a 3-month average volume of 8,727,720 shares. The company’s trailing P/E is 21.95, while trailing earnings are $4.40 per share.