Ackman Pershing Square Capital Management’s hedge fund took a sharp turn by selling 3.1 million shares it had bought just three months ago after Netflix’s shares fell 35 percent to $ 226.19.
In January, the investor spent more than $ 1 billion on the streaming service just days after a disappointing subscription forecast pushed the stock price lower. Now a second bout of negative news for subscribers – the company said it lost 200,000 – has prompted the fund manager to turn his back on a company he had showered with praise just weeks earlier.
In a brief statement announcing the move, Ackman said the proposed changes to the business model, including the inclusion of advertising and harassment of non-paying customers, made sense, but would make the company too unpredictable in the short term.
“While Netflix’s business is fundamentally easy 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 wrote.
Pershing Square, which now invests $ 21.5 billion, is buying shares in only about a dozen companies at once and needs a “high degree of predictability” in its portfolio companies, Ackman said.
Instead of waiting for Netflix to improve, Ackman suffered losses estimated at more than $ 400 million, people familiar with the portfolio said. After the sale, Pershing Square’s portfolios fell about 2% year-on-year, Akman said.
Netflix (NFLX) said it lost 200,000 subscribers in its first quarter, well below its modest estimate of adding 2.5 million subscribers. His decision to suspend service in Russia in early March after invading Ukraine resulted in the loss of 700,000 members.
Winning hedges helped Pershing Square survive the first days of the 2020 pandemic and then again in recent months as interest rates began to rise. The last three years have been among the best in the life of the hedge fund, including a profit of 70.2% in 2020.
But Akman also admitted in a statement Wednesday that he had learned from weaker times when his fund backed Valeant Pharmaceuticals, a disastrous bet that cost the hedge fund billions in losses.
“One of our lessons from past mistakes is to act in a timely manner when we discover new investment information that is incompatible with our original thesis. That’s why we did it here, “he wrote.
Add Comment