Netflix (Nasdaq: NFLX) CEO Reed Hastings wanted the world to know that members were watching "nearly a billion hours per month" so he posted an item on Facebook in early July saying just that.
Image source: Netflix)
Coincidentally, or not, the company's stock went up, and that caused eyebrows at the SEC to rise as well. The federal watchdog agency has now informed Netflix it plans to bring civil action "asserting we violated 'Reg FD,'" a rule "designed to ensure that individual investors have equal access to information," Hastings revealed in a statement explaining the latest developments in the case.
Hastings, according to the statement which was reported by Forbes, said that the online video service uses blogging and social media to "communicate effectively with the public and our members" and that these posts often receive press coverage "as there are many reporters and bloggers among you." While some of those Facebook members did re-post his comments, "we did not also issue a press release of file an 8-K about this," he continued.
Nevertheless, he conceded, the SEC "believes I gave you all 'material' investor information in my post and that we needed to instead release the June viewing fact 'publicly' with an 8-K filing or press release."
Hastings' answer, in addition to saying the company would fight the charges, is that "posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers" and adding that the company does not use Facebook or other social media to issue material information to investors. "We usually get that information out in our extensive investor letters, press releases and SEC filings."
The information, he maintained, is not "material" and "we had blogged a few weeks before that we were serving nearly 1 billion hours per month."
As for the stock rise in question. That was "likely driven by the positive Citigroup research report the evening before," he concluded.
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