Pershing Square, the hedge fund headed by billionaire investor William Ackman, has snapped up 3.1 million shares of Netflix, reports an article in The Wall Street Journal. A recent sell-off, driven by a combination of investors’ disappointment in the streaming giant’s 4th quarter subscriber growth and overall market volatility, was the catalyst for the purchase. Pershing Square’s stake comes to roughly 0.68% of Netflix’s 455.8 million outstanding diluted shares as of December 31st.
After the announcement, Netflix shares rose 4%, though the stock was still down about 40% so far in 2022. That decline was largely due to the news that it was off its subscriber estimate for the 4th quarter of 2021, with only 8.3 million subscribers added instead of the estimated 8.5 million. Given the competition in the streaming marketplace, ongoing pandemic disruptions, and their decision to raise monthly premiums, Netflix expects to add fewer subscribers this quarter as compared to what they added a year ago, the article continues.
As overall growth has stagnated for the company in the U.S., Netflix has turned its focus to overseas efforts. But while other up-and-coming streamers such as Disney+ compete for subscribers with more and more content, Netflix is still the leader in streaming, with 222 million paid members, $29.7 billion in revenue and a net income of $5.1 billion at the end of last year, according to the Journal article.
While his announcement about his fund’s Netflix stake didn’t give any indication as to whether the investment would be an activist position, Ackman is known for his activist positions in the past. However, for the last several years his focus has been on friendlier investments in popular companies such as Domino’s Pizza.