The sale of Netflix shares is massive due to the financial complications revealed by the streaming service in the first quarter.
On the seller’s list is one of the world’s best-known hedge fund managers, Bill Ackman, who He sold all his shares in the US company, arguing “uncertainty in the long-term business of Netflix”.
Pershing Square Capital Managementthe name of Ackman’s company, had bought 3.12 million shares of Netflix in January 2022 because they were “cheap”, according to some investors close to the tycoon.
However, this Thursday, April 21, the investment firm sold that stake.
The result? A huge loss of just over $400 million.
In a communication with Pershing Square shareholders, Ackman said he sold Netflix stock because the streaming company has announced plans that changed its original analysis of the company’s prospects.
Netflix said it will launch a low-cost, ad-supported streaming plan and try to monetize password-sharing users by introducing new identification factors.
In the letter, Ackman said, “Although Netflix’s business is simple to understand, recent events have made us lose confidence in our ability to predict the future of the company with a sufficient degree of certainty.”
According to Ackman, the idea of Netflix to “change its subscription-only model” to be able to be more aggressive with non-paying customers and the fact of adding advertising “are sensible”, but warns that “It is very difficult to predict the impact that these measures will have in the long term of the firm.”
Ackman doesn’t think he’s in a position to know whether that will add subscribers in the long run, whether it will give Netflix more revenue and more profit margins.
Netflix surprised investors this week by posting a net loss of 200,000 customers in the first quarter, its first drop since 2011.
And the worst: he forecast a massive drop of 2 million for the second quarter.
That led to the biggest percentage drop in history for Netflix shares, which plunged 36 percent on Wednesday, April 20, wiping $55 billion off market value in a few hours.
“Based on its track record, it would not be surprising if Netflix continues to be a successful company and an excellent investment at its current market value,” Ackman said.
He added: “But we think the spread of results has widened enough that it’s a challenge we won’t take on.”
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