Hedge fund manager William Bill Ackman sold his entire stake in Netflix (NASDAQ:NFLX), a move that resulted in a $400 million loss after the streaming service provider’s shares tumbled due to a decline in subscribers.
Ackman, founder and CEO of the hedge fund Pershing Square Capital Management, offloaded 3.1 million Netflix shares it acquired three months ago.
Earlier this week, Netflix reported a drop in the number of global paid subscribers for the first time in ten years, sending the company’s shares declining by 35% to $226.19 per share.
Ackman invested $1.1 billion in Netflix in January shortly after its shares fell due to a weaker-than-expected subscription forecast. In its earnings report this week, Netflix reported a decline of 200,000 in the number of paid subscribers, urging the billionaire investor to make a U-turn and sell his stake.
Ackman said that Netflix’s potential business model changes such as focusing on non-paying customers and advertising seemed reasonable, however, it would make the streaming giant very unpredictable in the short run.
"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," Ackman said in a statement.
He said that his hedge fund, which has a limited portfolio of just a dozen of companies, prefers to invest in companies that are highly predictable.
By Senad Karaahmetovic