Netflix shares fell nearly 10% in premarket trading on Friday after chairman and co-founder Reed Hastings announced he was leaving the company at a crucial moment, as the streaming pioneer seeks new avenues for growth after a failed deal with Warner Bros. Discovery, UNN reports with reference to Reuters.
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In a letter to investors on Thursday, Netflix said Hastings would not seek re-election at the annual meeting in June and plans to focus on philanthropy and other pursuits.
"This was unexpected news, and Hastings is considered the DNA of the company," said Kathleen Brooks, research director at XTB.
Hastings, who co-founded the company 29 years ago, was at the forefront of Netflix's rapid transformation from a DVD-by-mail business to a global streaming giant and guided the company through strategic challenges and difficult periods, such as the pandemic.
The co-founder also led a failed high-stakes war earlier this year to acquire Warner Bros. Discovery, which would have given Netflix a number of valuable franchises, including "Game of Thrones" and "Friends."
"Hastings' departure from Netflix has shaken investors at an interesting time for the company," Brooks said.
The move comes as the streaming giant faces declining revenues due to fierce competition, prompting the "Stranger Things" producer to try new avenues for growth, including ad-supported content, live sports, and games.
"While some of this valuation decline will also be due to investor disappointment that Hastings is leaving the business, it's fair to say that Netflix doesn't usually have a habit of delivering poor earnings," said Dan Coatsworth, head of markets at AJ Bell.
Netflix shares have lost more than 18% since early December, when the company first bid for Warner Bros. On February 26, the company said it was abandoning the deal, and shares have since risen 21%.
On Thursday, the company beat first-quarter revenue and profit forecasts, predicting current-quarter earnings per share below analysts' expectations and quarterly revenue growth to be the slowest in a year, according to LSEG data.
Investors are now fully focused on the returns from the streaming giant's aggressive efforts to expand its live streaming offerings, as well as revenue growth from price increases.
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