The Investment Genius Who Recommended 'Netflix' Cuts Losses After Stock Plunge... "500 Billion Won Damage"
by Jeong Hyunjin
Published 21 Apr.2022 09:44(KST)
Updated 21 Apr.2022 09:50(KST)
[Asia Economy Reporter Jeong Hyunjin] Amid a 35% plunge in the stock price of Netflix, the world's largest online video streaming service (OTT) company, on the 20th (local time), Bill Ackman, the hedge fund industry titan known as the 'Little Buffett' and CEO of Pershing Square Capital, announced that he has completely liquidated his Netflix holdings.
Just three months after aggressively purchasing Netflix shares in January, seeing it as an opportunity, he cut losses ("손절," selling to minimize losses before further price drops), resulting in losses exceeding 500 billion KRW.
According to Bloomberg and other sources, Pershing Square announced in an investor letter on the afternoon of the same day that it had sold all 3.1 million Netflix shares. Bloomberg estimated that the losses Pershing Square incurred from this stock sale exceeded $430 million (approximately 531.8 billion KRW). When Pershing Square purchased the shares, the stock price was $360, and it closed at $226.19 on the day of the sale.
Earlier, on January 26, CEO Ackman had stated that the Netflix stock price decline was an opportunity and purchased the shares. At that time, Netflix's stock price had sharply dropped since November of the previous year, and Ackman expressed a positive view of the subscription business model, saying, "I am grateful the market gave us this opportunity." However, the situation reversed after Netflix announced its first subscriber decline in 11 years in its Q1 earnings report the day before.
On the day of the sale, CEO Ackman informed Pershing Square investors of the complete sale of Netflix shares, explaining the reason by saying, "We believe changes in the company's future subscriber growth could significantly impact our valuation of its intrinsic value," and "I have lost confidence in our ability to reliably predict Netflix's future outlook."
He added, "One of the lessons learned from past mistakes is to act quickly when new information related to an investment makes it impossible to maintain our existing thesis," stating that this time, he acted accordingly.
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