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On
Tuesday, the billionaire investor's hedge fund, Pershing Square
Capital Management, was likely nursing losses as Netflix shares
tumbled 26% in after-hours trading after the company reported
losing subscribers for the first time in a decade.
Ackman, who routinely moves stock prices by buying into or
exiting a company, did not say how much he paid for his Netflix
stake, which he unveiled to his investors on Jan. 26. But he did
say that he began acquiring the stake on Jan. 21, the day after
Netflix's announcement sent its stock plunging.
From Jan. 21 through Jan. 26, Netflix shares traded in a range
of $351.46 to $409.14. The 26% drop in Netflix shares in
after-hours trade on Tuesday, bringing them to $257.98, would
imply a loss for Ackman's fund on the Netflix investment of
roughly 26% at the low end and a loss of 37% at the high end.
Before Netflix's January outlook its stock had been trading
around $500. Indeed, its shares had been dropping for months and
Ackman called them "undervalued."
For Ackman, the drop, while unwelcome, may not be entirely
unexpected as he had warned his investors earlier this year that
Netflix would face "near-term variability" in quarterly growth
and profitability. Long term, however, he said he expects to see
double-digit annual revenue, expanded operating profit margins,
and earnings per share growth of more than 20% a year.
A Pershing Square spokesman declined to comment.
The Pershing Square Holdings fund was already nursing small
losses through the end of March before Netflix shares dropped on
Tuesday, which likely pulled returns down even more. But these
returns stand in stark contrast to three years of high
double-digit gains for the fund that includes a 70.2% rise in
2020.
The firm's assets now total $21.5 billion, including permanent
capital in which would-be sellers can exit only if there are new
buyers. This allows Ackman to worry less about potentially
jittery investors wanting out and having to sell positions to
meet redemptions.
Ackman has weathered big slides before, including when shares in
fast-food chain Chipotle cost his fund some $145 million in
value in late October 2017. He joked in an interview with
Reuters at the time that his investment team would be eating
Chipotle until the stock price returned to $500 a share. On
Tuesday, Chipotle closed at $1,632.03
(Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler)
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