One of Netflix's Largest Shareholder Lost Over $400 Million, Backed Out of Investment

It has been a turbulent week for Netflix as the streaming service's stock has tumbled after the company disclosed a major loss of subscribers in the first quarter of 2021 and predicted even more would be lost in the second quarter of the year. As a result of the change in stock price and a shift in strategy to navigate it all, the largest shareholder in the company has offloaded all of their shares in the company. As reported by Bloomberg, Bill Ackman of Pershing Square Capital Management revealed on Wednesday that his fund had sold their 3.1 million shares in the company. This stock had been valued at over $1 billion ahead of Netflix's latest investor relations report, losing over $430 million in value after the stock fell over 30%.

"We require a high degree of predictability in the businesses in which we invest due to the highly concentrated nature of our portfolio," Ackman wrote in a letter to investors. "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. Based on management's track record, we would not be surprised to see Netflix continue to be a highly successful company and an excellent investment from its current market value. That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding." Ackman was previously among the 20 biggest investors in Netflix, buying his 3 million+ shares in the first part of 2022.

In their own letter to investors, Netflix made clear that their loss of subscribers in the first quarter was largely due to suspending their services entirely in Russia, resulting in the loss of 700k paid subscribers. Without taking that loss into account however, Netflix added 500k subscribers in the quarter, but they still predict that in Q2 they will lose upwards of 2 million paid subscribers. Should their forecast of lost subscribers in the quarter become reality that would mean the gains made by Netflix in the same quarter last year (1.5 million in Q2 2021) would be lost entirely. 

Netflix also noted that they believe one of the biggest hindrances on company growth and the loss of paid subscribers is password sharing, something they reportedly intend to crack down on. The streamer also announced that they would be exploring the option of a tier on the service that would be at a lower rate and be supported by ads.

(via Bloomberg)