The announcement by Netflix that it expects now lower new domestic subscribers and the following stock drop caused an investigation on behalf of investors in Netflix, Inc. (NASDAQ: NFLX) shares over potential Federal Securities Laws violations.

The investigation by a law firm focuses on possible shareholder claims based on potential violations of the federal securities laws. Specifically the investigation concerns whether Netflix, Inc. or others may have violated securities laws by issuing a series of statements regarding its business, its prospects and its operations that were materially false and misleading at the time they were made.
Netflixs annual Total Revenue rose from $1.2billion for 2007 to $2.16billion for 2010. Its Net Income rose over the same time frame from $66.61million for 2007 to $160.85million for 2010. Its first quarter Revenue increased from $519.82million one year earlier to $718.55million for the first quarter in 2011 and its first quarter Net Income rose from $43.52million to $60.23million.

Shares of Netflix, Inc. (Public, NASDAQ:NFLX) grew at an exceptional growth rate over the past years. NASDAQ NFLX stock skyrocketed from $21.85 in the beginning of 2008 to as high as $295.14 per share on July 8, 2011.

However, shares of Netflix, Inc. (Public, NASDAQ:NFLX) dropped from almost $300 per share on July 8 to $252.25 during Tuesday July 26, 2011.

On July 25, 2011, after the market closed, Netflix, Inc. (NASDAQ: NFLX) has released its second-quarter 2011 financial results. Netflix third-quarter sales and profit forecast missed analysts estimates and Netflix Inc. disclosed that a price change would cause a negative impact in new customer signups.
Among other things, Netflix, Inc said the global profit for the third quarter is expected to be $0.72 per share to $1.07 per share. However, analysts projected a profit of $1.11 per share.