Edited by: TJVNews.com
Due to a recent sell off in Netflix stock and negative reactions from investors concerning the decrease in subscribers in the streaming giant, billionaire hedge fund magnate William Ackman has announced that his firm, Pershing Square Capital Management has acquired more than 3.1 million shares in the company.
In a tweet on Wednesday, Ackman said: “I have long admired Reed Hastings and the remarkable company he and his team have built. Hastings is Netflix’s chairman and co-chief executive. “We are delighted that the market has presented us with this opportunity,” he wrote. The Wall Street Journal reported that Ackman was complimentary of the company’s business model in a letter included in his tweet and gave no indication that the investment would be an activist position.
In the letter to investors, Ackman wrote: “The opportunity to acquire Netflix at an attractive valuation emerged when investors reacted negatively to the recent quarter’s subscriber growth and management’s short-term guidance.” Bloomberg reported that he cited the company’s favorable characteristics, including its subscription-based business model and its management team. “We are all-in on streaming.”
Bloomberg reported from their high in November, Netflix shares have since fallen almost 50%. The company’s growth has slowed in terms of the expected number of new subscribers for this year. The WSJ reported that in the fourth quarter of the past year Netflix added 8.3 million subscribers instead of the projected 8.5 million. Netflix said it expects to add a much smaller number of subscribers this quarter than it did a year ago as it contends with a crowded streaming marketplace and ongoing disruptions from the Covid-19 pandemic, according to the report.
The company added 18 million customers last year, the least since 2015, and forecast the slowest start to a year in at least a decade, as was reported by Bloomberg.
In the aftermath of the news of Ackman’s stock acquisition, shares of Netflix rose 4% in after-hours trading, according to the WSJ. Through Wednesday’s close, the stock was down about 40% for the year. It closed Wednesday at $359.70, compared with a high of $691.69 on Nov. 17. Pershing is now among Netflix’s top 20 shareholders, according to the Bloomberg report.
Netflix leadership has expressed confidence in its long-term vision, according to the Bloomberg report. The world’s most popular streaming service has a leading position in almost every major market, and the transition from linear to TV to streaming is still in its underway.
Citing increased programming costs, earlier this month, Netflix said they intended to increase the price for its monthly plans for customers in the US and Canada. The WSJ reported that this was the first increase for subscribers since 2020.
Ackman’s name has been attached to such companies as Herbalife Nutrition where he was an outspoken activist, according to the WSJ report.
In June of 2021, it was reported that Ackman’s company was in talks to purchase 10 percent of Universal Music Group for roughly $4 billion.
The deal valued the Vivendi-owned Universal Music Group at around $42.4 billion, making it the biggest target ever for any special purpose acquisition company, or SPAC. Universal Music, the world’s leading music company, is majority owned by the French media conglomerate Vivendi which holds an 80 percent stake, and Chinese tech company Tencent owns a minority stake of about 20 percent. Founded 86 years ago, UMG is home to many of the greatest artists, songwriters and song catalogs around the globe including singers Taylor Swift, Lady Gaga and Kanye West.
Ackman subsequently backed off on the plan after pushback from regulators, according to the WSJ,
In May of 2021, Ackman said that his Pershing Square Capital Management hedge fund built a 6% stake in Domino’s Pizza by swapping Starbucks for it. Bloomberg News reported that this means that Ackman is adding another big-name consumer company to his portfolio. Ackman said he bought into Domino’s when the shares dipped to roughly $330, as was reported by Bloomberg Business News.
During the Wall Street Journal’s Future of Everything Festival, Ackman said: “We sold Starbucks. It got to a price that it was hard to earn the excess return we like to earn … The stock just recovered too quickly,” as was reported by CNBC.