National investment fraud lawyers KlaymanToskes is investigating (“Netflix Stock Losses Investigation”) individual securities arbitration claims on behalf of current and former Netflix employees and investors who sustained losses from holding concentrated or margined positions in Netflix through full-service brokerage firms.
In June 2020, Netflix’s stock price was around $418.00. From June 2020 to late 2021, numerous brokerage firms upgraded or maintained buy recommendations for Netflix while its stock rose as high as $675.00 in November 2021. Following this rise, Netflix price dropped in value to around $226.00 as of April 20, 2022, which is nearly a 67% drop. As a result, many Netflix shareholders who used their Netflix stock as collateral for margin loans likely received a margin call and a substantial portion of their stock was liquidated.
On April 19, 2022, Netflix disclosed in a letter to shareholders that its revenue growth has “slowed considerably.” Netflix referenced competition, high household penetration, and a “big COVID boost” as attributing to revenue growth headwinds. The shareholder letter coincides with the streaming company’s statement that the it lost subscribers when it reported its first quarter earnings in April 2022.
Full-service brokerage firms whose customers hold large, concentrated stock positions in securities like Netflix have a duty to ensure that their customers understand the risks associated with concentration and to disclose and recommend the availability of risk management strategies, which can be used to protect the value of the concentrated portfolio. A brokerage firm’s failure to recommend a strategy to manage the risks associated with securities concentration or margin use is considered negligence, and is a basis for liability in a FINRA arbitration claim.
Securities concentration in stocks like Netflix might be caused by an employer restriction, tax avoidance, psychological and emotional attachment to the company stock. No matter what the reason for maintaining a concentrated stock position, a brokerage firm and its financial advisors must recommend suitable risk management strategies to protect the value of any concentrated stock position held in a financial brokerage account.
Brokerage firm customers that hold concentrated positions and do not receive when appropriate a recommendation for risk management strategies may be able to recover investment losses through a FINRA arbitration award. In some instances, financial advisors might recommend risk management strategies such as complex hedging strategies to reduce the risk of a concentrated stock position. Unfortunately, the brokerage firm’s failure to supervise financial advisor’s who failed to implement the strategy properly, the brokerage firm may be held accountable for negligence.
In furtherance of our Netflix investigation, KlaymanToskes encourages investors who purchased Netflix between June 2020 and January 2022 and realized losses in excess of $100,000, as well as those who have information relating to the handling of their accounts, to contact securities attorney Lawrence L. Klayman, Esq. at 1-888-997-9956, and download our Special Investor Report.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered more than $230 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.