Bill Ackman’s Pershing Square dumps Netflix shares, suffering $400m loss as shares tumble

Ackman’s hedge fund, Pershing Square Capital Management, flip-flopped, selling the 3.1 million shares it bought just three months ago as Netflix shares fell 35 % at $226.19.

In January, the investor pumped more than $1 billion into the streaming service just days after a disappointing forecast for subscriptions dragged the stock price down. Now a second round of negative subscriber news – the company said it had lost 200,000 – has prompted the fund manager to turn his back on a company he had showered with praise just weeks before.

In a brief statement announcing the move, Ackman said the proposed changes to the business model, including integrating advertising and pursuing non-paying customers, made sense but would make the company too unpredictable in the short term.

“While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty,” he said. -he writes.

Pershing Square, which now invests $21.5 billion, only buys shares in a dozen companies at a time and needs a “high degree of predictability” in its portfolio companies, Ackman said.

Rather than wait for things to improve at Netflix, Ackman blocked losses estimated at more than $400 million, people familiar with the portfolio said. After the sale, Pershing Square’s portfolios are down about 2% for the year, Ackman said.

netflix (NFLX) said it lost 200,000 subscribers in the first quarter, well below its modest forecast of adding 2.5 million subscribers. Its decision in early March to suspend service in Russia after invading Ukraine led to the loss of 700,000 members.

Profitable hedges helped Pershing Square survive the early days of the pandemic in 2020 and then again in recent months as interest rates began to rise. The past three years have been some of the best in the life of the hedge fund, including a 70.2% gain in 2020.

But Ackman also acknowledged in his Wednesday statement that he learned from tougher times when his fund backed Valeant Pharmaceuticals, a disastrous gamble that cost the hedge fund billions in losses.

“One of the lessons we’ve learned from past mistakes is to act quickly when we discover new information about an investment that doesn’t align with our original thesis. That’s why we’ve done that here,” a- he writes.

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