Ackman snaps up $1bn Netflix stake to go “all-in” on streaming
Billionaire activist investor Bill Ackman has revealed he has built a stake in Netflix worth more than $1bn dollars, as the streaming giant battles a spiralling share price and investor exodus.
Ackman announced on Twitter yesterday that his firm Pershing Square Capital Management started buying up Netflix shares on Friday and was now a top-20 shareholder in the firm.
In a letter to investors, Ackman said he “greatly admired” Netflix and had jumped at the opportunity to buy shares at an “attractive valuation” after the share price plunged following its recent slowdown in subscriber growth.
He told Pershing investors that Netflix has a number of “favourable characteristics” including highly recurring revenues, which have “enormous future growth potential”, as well as “a truly best-in-class management team.”
Pershing already holds a stake in Universal Music Group and Ackman said the move to back Netflix showed the firm was “all-in on streaming models”.
“We love the business models, the industry contexts, and the management teams leading these remarkable organizatons,” he added.
To raise the cash for the Netflix purchase, Ackman said the firm unwound a big piece of its interest rate hedge which generated profits of $1.25 billion.
Ackman’s investment will be a boon to Netflix after a difficult month which has seen its share price fall 41 per cent.
Netflix has been among a group of so-called stay-at-home stocks that soared through the pandemic and have slumped as global covid restrictions ease and demand wanes.
Home fitness firm Peloton has similarly suffered a turbulent few weeks after it was reportes bosses had cut back production of its exercise bikes in line with a slowdown in demand. Shares plunged 20 per cent after the reports.
Gregori Volokhine, president of Meeschaert Financial Services, told AFP that Netflix, Amazon, PayPal, eBay and Etsy have all fallen between 20 and 50 percent from their peaks.