Netflix CEO Reed Hastings posted the following on the company's Facebook page in July and it recently earned him the ire of the Securities & Exchange Commision:
Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.
I'm no expert in securities law, but it seems to me that the case for materiality here is fairly weak.
An analyst mentions in the related Reuters piece that this post caused the stock to go up from $70 to $80 that day, so of course it was "material". I see at least three things wrong with this argument.
- First, if the market's reactions were, alone, the test for materiality, then no one would say anything, anywhere, ever, about their business aside from turgid press releases and regulatory filings.
- Second, I suppose any analysts who are crying foul are doing so because A) they were caught not paying attention, or B) the information was not disclosed in a less public and slightly more ephemeral forum that analysts tend to access... like, say, an earnings call, for example.
- Third, the fact that Netflix was about to breach the billion-hour-per-month mark should not have come as any surprise to anyone who reads the very public, no-Facebook-account-required Netflix blog.
What this drives home is the fact that the regulatory agencies still run things based on rules meant to restrain the likes of Morgan, Rockefeller, Carnegie, and the like. Any adaptations and modernizations have amounted to just so many crufty, hastily applied patches.
Some smart commentary on this is available at AllThingsD.
Photo Credit: Silence99