Bill Ackman has expressed his interest in buying Netflix shares. Ackman’s fund acquired 3.1 million Netflix shares for more than $1.1 billion.
Introduction
Bill Ackman, the founder of Pershing Square Capital Management, informed shareholders that his firm has been buying shares in Netflix. This makes them one of the company’s top 20 shareholders. Ackman’s company had acquired 3.1 million Netflix shares, which would be worth more than $1.1 billion.
About Bill Ackman
William Albert Ackman is a hedge fund manager and investor from the United States. He is the founder and CEO of the management firm, Pershing Square Capital Management. He is an activist investor because of his investing strategy.
While Ackman is renowned for being an activist investor, the Netflix purchase binge seems to be focused on value.
Netflix shares Plummeted
When investors responded badly to the last quarter’s subscriber growth and management’s short-term projection, the chance to purchase Netflix at an attractive value arose. Recent market volatility exacerbated Netflix’s considerable stock price loss.
Ackman stated in his letter. “We are pleased to add Netflix to our portfolio. Many of our best investments have emerged when other investors whose time horizons are short term, discard great companies at prices that look extraordinarily attractive when one has a long-term horizon.”
Last week, Netflix’s shares plummeted when the company issued poor expectations to Wall Street. The sell-off continued this week, with the stock dropping to its lowest level in almost a decade.
Ackman’s SPAC Pershing Square Tontine announced and then withdrew an agreement to buy a 10% interest in Universal Music Group last year. He has mainly avoided Hollywood-related enterprises. Instead, Ackman’s flagship fund, Pershing Square Capital Management, bought the stock outright, forcing the SPAC to seek a new investor.
The Netflix buy
“We began analyzing Netflix in connection with our investment in Universal Music Group, so we were prepared when the stock price declined sharply last Friday. Now with both UMG and Netflix, we are all-in on streaming as we love the business models, the industry contexts, and the management teams leading these remarkable organizations,” Ackman wrote.
As the world’s largest music publisher, UMG generates considerable revenue from streaming services like Spotify, Apple Music, and Amazon Music. It also includes platforms like YouTube and TikTok.
Ackman said the Netflix purchase was funded with $1.25 billion from an interest rate hedge.
Conclusion
After Netflix reported weaker-than-expected membership data earlier this month, investors and analysts sold their shares. Ackman, on the other hand, acquired shares, believing most of Wall Street to be myopic.
At least on the surface, it looks like the investment is yielding positive results. Since Ackman made his interest in Netflix public, Netflix’s stock has gained 5%. The company’s stock has lost 37% of its value so far this year.
Ackman hasn’t engaged in a proxy war in four years, and it seems that he now prefers to work behind the scenes with corporations. While his $1 billion investment looks passive at the moment, Netflix’s rising cash flows are the cause of his optimism about the company’s stock.
Also, Read You can now watch Netflix on Tata Play
