It’s easy to make fun of the SEC for wanting to sue Netflix over a Facebook post. Netflix, Facebook, and the SEC are all a little funny, and bring them all together and you get a delightful orgy of hip-five-years-ago clumsiness. Also, like, olds, get over yourselves, everyone is on Facebook, why should I call Grandma on her birthday, or 8-K my operational stats? Social! 2.0!
And yet I’m a little sympathetic to the SEC here, mostly because I am old and afraid of Facebook. The agency notified Netflix yesterday that it’s planning to bring a civil action claiming that Netflix violated Reg FD by posting operational numbers – that Netflix viewing had exceeded 1 billion hours of Netflix June – on CEO Reed Hasting’s Facebook wall without press releasing or 8-King those numbers. Reg FD prohibits an issuer from “disclos[ing] any material nonpublic information regarding that issuer or its securities” to any investor or analyst without simultaneously disclosing that information through a “method (or combination of methods) of disclosure that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public.”
So if you’re Netflix you have two ways to win this: either the information was not material, or it was disclosed publicly in compliance with Reg FD. Perhaps strangely, Netflix is taking both angles. From its response yesterday: Read more »