Bill Ackman, the founder of Pershing Square Capital Management, who less than three months ago bought $1.1 billion in Netflix stock, sold his entire stake in the company at a huge loss, activist investor disclosed on Wednesday.
“While we appreciate the management of Netflix and the remarkable company they have built, given the enormous operating leverage inherent in the company’s business model, changes in growth The company’s future subscriber growth may unduly impact our intrinsic value estimate,” Ackman wrote in a letter to Pershing shareholders. “In our initial analysis, we view this operating leverage as beneficial given our long-term growth expectations for the company.”
The move is a face-to-face for Ackman, who made a massive purchase of the company in January, and praised Netflix in Pershing’s March 29 annual report as a company “well-positioned as a daily beneficiary.” Led by the world’s long-term growth in streaming, a high-quality business overseen by a world-class management team. In the same report less than a month ago, Ackman added: “We believe Netflix’s current valuation represents a meaningful discount to intrinsic value for a business of high quality. outstanding volume and growth potential.”
If Pershing bought 3.1 million shares of Netflix at a closing price of $359.70 per share on January 26 for $1.1 billion, when the company closed at $226.19 on Wednesday, the number That stock would be worth about $700 million.
The sale comes a day after Netflix revealed that it lost 200,000 subscribers in its most recent quarter, bringing its total global membership to 221.64 million. More saddening for Wall Street is guidance that the streaming giant is expected to lose another 2 million subscribers in the next quarter. “I know it’s been disappointing for investors, and that’s for sure,” co-CEO Reed Hastings told analysts on an April 19 earnings call, at the same time. added that “we are extremely focused” on “regaining the kindness of investors. ”
As part of wooing investors, Netflix executives revealed plans to not only stop password sharing, but eventually introduce a cheaper, ad-supported tier of service. and continues to expand into a video game streaming service. Wall Street wasn’t impressed, and Netflix stock plummeted 35% on Wednesday as multiple analysts offered the stock’s downside price target.
Ackman, in his letter, welcomed Netflix’s effort but said it wasn’t enough to hold the stock. “While Netflix’s business is fundamentally simple to understand, with recent events we have lost confidence in the company’s ability to predict the future prospects with sufficient certainty. big,” the activist investor wrote on Wednesday. “Based on management’s track record, we wouldn’t be surprised to see Netflix continue to be a very successful company and an excellent investment relative to its current market value.”
