Billionaire investor William Ackman liquidated his $1.1 billion bet on Netflix on Wednesday, ending up with a loss of more than $400 million after the platform disclosed that it had lost subscribers for the first time in a decade. Ackman’s investment fund, Pershing Square Capital Management, did a 180-degree turn by selling the 3.1 million shares it bought just three months earlier after Netflix’s stock price plummeted 35% to $226. .19 dollars.
In January, the investor funneled more than $1 billion into the streaming service just days before disappointing forecasts sent the share price plunging. Now, a second round of bad news, this time with subscribers (the platform claims to have lost 200,000), has pushed Ackman to turn his back on the company that he had filled with praise just a few weeks earlier.
In a brief announcement about the move, Ackman explained that the proposed business model change, including adding ads and going after customers who don’t pay but instead share their accounts with others, made sense but would make the firm too unpredictable in the short term. term. “Although Netflix’s business is easy to understand at a fundamental level, in light of recent events, we have lost confidence in our ability to predict the future of the company with a sufficient degree of certainty,” he wrote.
Pershing Square, which has an investment of $21.5 billion, only buys shares of a dozen companies at a time, and requires a “high degree of predictability” in the firms it supports. Rather than wait for things to improve for Netflix, Ackman chose to be conservative and stick with losses estimated at more than $400 million, according to sources close to the investment plan. Following the sale, the company’s investment package has drifted just 2% a year, Ackman said.
Netflix reported that it has lost 200,000 subscribers in the first quarter of 2022, falling short of its already modest predictions of getting 2.5 million new subscribers. In this context, the firm’s decision to suspend its service in Russia after the invasion of Ukraine resulted in the loss of 700,000 members.
His profitable hedges helped Pershing Square survive the early days of the pandemic in 2020, and it has happened again in recent months following interest rate hikes. The last three years have been some of the best in hedging results, including a 70.2% gain in 2020. However, Ackman also acknowledged that he had learned the hard way after investing in Valeant Pharmaceuticals, a disastrous bet. which cost billions in losses. “One of the things we have learned from past mistakes is to act quickly when we discover new information about an investment that is not consistent with our original thesis. That is why we have done this,” he wrote.