Bill Ackman disclosed a new, billion-dollar bet on Netflix in a letter to clients on Wednesday.
Ackman’s Pershing Square has snapped up more than 3.1 million Netflix shares since Friday, giving it a roughly $1.1 billion stake, the billionaire investor revealed. His hedge fund’s 0.7% stake makes it one of the video-
giant’s 20 largest shareholders, he noted.
Ackman and his team pounced on
stock following its precipitous decline in recent weeks. The company’s shares have almost halved in value since peaking at $701 in mid-November, and have plunged by 29% in the past four trading days alone.
The latest decline was sparked by Netflix reporting disappointing subscriber growth in the fourth quarter, and warning that increased competition and pandemic-related disruptions would likely weigh on subscriber growth this quarter.
Netflix shares have also been caught up in the broader sell-off of technology stocks this week, which was fueled by concerns about inflation and the prospect of the
hiking interest rates this year.
“I have long admired Reed Hastings and the remarkable company he and his team have built,” Ackman tweeted, referring to Netflix’s cofounder and co-CEO. “We are delighted that the market has presented us with this opportunity.”
Pershing Square began analyzing Netflix while sounding out its investment in Universal Music Group last year, Ackman noted in his letter. He cited Netflix’s subscription model, management team, and pricing power as some of the reasons he’s bullish on the online media platform.
The hedge fund manager also highlighted Netflix’s exposure to the fast-growing streaming industry, its vast and diverse library of content, and its excellent user experience. Moreover, he underscored global improvements in bandwidth, and the proliferation of electronic devices that can be used to watch Netflix, as key drivers of its long-term success.
Pershing Square funded its Netflix bet by cashing in most of its hedges against interest rates for about $1.2 billion, Ackman said in his letter.