Ackman sold the Netflix holdings in his company Pershing Square Capital Management on Wednesday after the pioneer in streaming platform reported a drop in its subscriber base in the first quarter and projected a further decline in this quarter.
As per Bloomberg News, the share price of Netflix sank to $226.19, down by 35% at the close in New York, making the stock the worst performer in S&P 500 in 2022.
Ackman was among the top 20 largest shareholders, buying into the stock when it dipped over concerns of depleting subscribers. His fund has already lost more than $345 million on the price disclosed on Jan 26 for 3.1 million shares purchased. The holding should have been worth $700 million before the loss.
A representative of Pershing refused to comment on the quantum of loss.
Netflix’s share price plunge in 2022
Netflix shares had climbed during the pandemic and peaked in November, doubling from the 2020 start price. The plunge on Wednesday has the stock down by 62 % in 2022.
In January, after buying the stock after Netflix share prices dipped, Ackman told his investors in a letter that it was an opportunity to buy Netflix at attractive valuations. He had cited positive attributes of the company, including the subscription model and management team.
The purchase of Netflix in January was funded after Pershing’s unwinded substantial interest rate hedge that generated funds stop the tune of $ 1.25 billion.
In a letter on Wednesday to his shareholder, Ackman said that his overall fund had declined by 2% this year. His exit from bad bets early is due to learning from past mistakes. He said that he would redeploy the proceeds from Netflix sales to better opportunities.
The billionaire investor, Netflix’s loss, Is not his first one. He admitted defeat with Carl Icahn on his short position in Herbalife Ltd and booked a loss of $4 billion on a wrong bet on Valeant Pharmaceuticals. Ackman also had trouble achieving the target for his blank cheque firm Pershing Square Tontine Holdings Ltd., which had raised $4 billion in July 2020 but has still not completed the merger transaction.
He, however, improved his fortunes in recent years with back-to-back record returns in 2019 and 2020 in his hedge fund.
The “N” in the FAANG tech stocks that stood for Netflix drove the euphoria in the market in the past few years and is now the fallen angel. Netflix, which invented the idea of binge-watching with favorites like “Bridgetown” and ” Squid Games,” is now looking at new ways to boost revenue. It is considering a subscription with an ad version and taking steps against customers who share their passwords with friends and families, which pointed out that subscribers’ growth days were past.
