Bill Ackman has potentially racked up an unrealized $400 million profit in his Netflix wager which he made just two months earlier.
Netflix share prices fell as high as 37 percent on Wednesday after the video streaming service announced slow growth in its revenue in the last quarter and predicted the number of subscribers it would lose by 2 million users, bringing it to just under 220 million by the end of the quarter.
Pershing Square’s Pershing Square bought about 3.1 million Netflix shares within just four trading days in January’s final days, securing an 0.7 percent stake that was valued at $1.1 billion. The latest drop in the media stock has reduced Pershing Square’s holding to around $700 million which is a 36% decrease.
Pershing Square started buying Netflix shares on January 21st, the day that the stock plunged 25 percent because of an unfavorable forecast for growth in subscribers as well as a general sale of technology stocks due to an increase in inflation and increasing interest rates.
Ackman who usually invests in real-world enterprises like Chipotle as well as Domino’s Pizza explained the investment by saying that he’s an avid fan of Netflix co-CEO Reed Hastings and his company. He also praised its subscription-based model for Netflix, its management team and pricing power, its huge and extensive library of content and user experience that is outstanding, and its strong position in the fast-growing industry of streaming.
Furthermore, Ackman tweeted in January that he was “delighted” to finally have the opportunity to invest his money in Netflix at a price that was attractive. If his decision-making process isn’t altered, he may think of Netflix stock as a better bargain after its recent slump.
Pershing Square has declined to make a statement.
Netflix shares hit a high of 700 dollars in the month of November. They’ve fallen down by 69% in the time since then and dropped greater than 63% in 2018 in the first quarter alone.
In the earnings conference, Netflix’s CEO Hastings as well as his staff blamed the company’s slow expansion on account sharing as well as intense competition from the newer services like Disney Plus and HBO Max. They’re looking at the possibility of rolling out the cheapest, ad-supported pricing tier that could boost growth, they claimed.