‘Speculation genius’ Bill Ackman lost more than $ 400 million because of ‘bottom fishing’ Netflix, quickly sold out in less than 3 months
The fund said on April 20 that it was selling shares of Netflix after the streaming service company recorded an unexpected drop in subscribers in the first quarter. Netflix even forecast an even sharper decline. in the current quarter. After the April 20 session ended, Netflix stock lost 35%, down to $226.19 and became the worst performer in the S&P 500 this year.
Before that, Ackman was one of Netflix’s 20 largest shareholders this year. The “bottom-fishing” deal was made after Netflix stock began to fall due to concerns about the number of registered users.
Based on the price before Ackman revealed his holdings in Netflix on January 26, his fund has lost about $435 million in holdings of more than 3.1 million shares. As of the end of April 20, Ackman’s stake in Netflix was worth about $700 million.
Netflix stock has recorded strong momentum during the pandemic and peaked in November last year, with a gain of more than double from the beginning of 2020. With the plunge on April 20, the stock is now gone. down 62% this year.
Regarding the “bottom-fishing” of Netflix stock, Ackman said in a letter to investors in January that “opportunities to buy this stock at a low price arise when investors react negatively to the speed of the stock.” recent quarter user subscription growth and management’s short-term forecast”. He pointed to the favorable factors for Netflix, including the company’s subscription-based business model and management team.
At the time, Pershing’s Netflix investment was made using the money after taking off a huge interest rate hedge position, which had generated a profit of $1.25 billion.
In a letter to shareholders on Wednesday, Ackman said his fund will record a 2% decline in returns in 2022. He said he has learned from the lessons of the past to exit the businesses early. inefficient investment. In addition, he also announced that he would transfer money from the sale of Netflix shares to look for other opportunities.
Netflix is not the first big loss for the “speculative genius”. He previously conceded failure to buy a short position in Herbalife following a televised spat with Carl Icahn. In addition, he also lost $ 4 billion after betting on Valeant Pharmaceuticals International Inc. Ackman also had trouble finding a target for his SPAC, Pershing Square Tontine Holdings Ltd. – which raised $4 billion in its IPO in July 2020 and has yet to complete the merger.
However, Ackman has tried to “turn upstream” in recent years. Pershing – New York-based hedge fund, continuously recorded record profits in 2019 and 2020.
Returning to Netflix, being a “member” of the FAANG group has somewhat boosted investor interest in the company over the past few years. However, this online photo service provider has now become a “fallen angel”.
Hit shows like “Squid Game” or “Bridgeton” have helped Netflix break through strongly and they are looking for new ways to increase revenue. The company is considering running ads on the platform and restricting users from sharing accounts with friends and family. Both of these plans suggest that Netflix can easily hit its user growth target.
Refer to Bloomberg
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