In a resounding sign of no confidence, hedge fund billionaire Bill Ackman has dumped the 3.1 million shares of Netflix that his fund purchased just three months ago, saying he has lost confidence in the ability to predict the streamer’s future prospects.
Ackman’s sell-off comes after Netflix shares tanked close to 40 percent on Wednesday following disastrous first-quarter results that included a loss of 200,000 subscribers and a predicted loss of 2 million more in the months ahead.
His fund Pershing Square Capital Management is taking a sizable loss on its $1.1 billion investment — various reports put the loss at more than $400 million. Ackman said “recent events” have clouded the steamer’s outlook.
“While Netflix’s business is fundamentally simple 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 in a letter to investors obtained by multiple news outlets.
He said Netflix’s efforts to seek new revenue streams — including an ad-supported version of its service — “are sensible,” but it remains “extremely difficult to predict their impact on the company’s long-term subscriber growth, future revenues, operating margins and capital intensity.”
Since Pershing only invests in a relatively small number of companies, the fund is looking for a “high degree of predictability” in its portfolio.
Pershing purchased 3.1 million shares of Netflix in January in the wake of the streamer’s disappointing fourth-quarter results. The resulting sell-off at the time presented a “compelling” buying opportunity, Ackman said. But instead of rebounding, the stock has only continued to decline.
Ackman isn’t the only famous billionaire going bearish on Netflix. Elon Musk called out the streamer this week for its woke content. “The woke mind virus is making Netflix unwatchable,” he tweeted.
Shares of Netflix continued their decline Thursday, falling more than 3 percent in morning trading. For the year, the stock has lost a stunning 64 percent of its value.