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Ackman’s Pershing Square loses $400 million on Netflix stock sell-off

Yahoo Finance Live’s Julie Hyman and Brian Sozzi discuss Bill Ackman’s Pershing Square losing $400 million on Netflix stock sell-off.

Video Transcript

BRIAN SOZZI: All right, our second thing on our list here this morning is shares of Netflix. The stock got absolutely pummeled by 35% today. And guess what? It is down close to another 4% here in the pre-market. Now, Bill Ackman's Pershing Square is shedding its shares of the streaming company after buying more than 3 million in January. Pershing Square took a loss of $400 million from the sell-off.

And in a letter to shareholders, the billionaire says, quote, "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."

And Julie, this is not-- just wasn't a good play here by Bill Ackman for many reasons. Of course, he's taking a loss, too, but he was very public when he took this position a couple of months ago. He was very enthusiastic. And no doubt about it, when you put his name onto a stock like that, a lot of people likely followed him right down to the drain.

JULIE HYMAN: I think there are two parts to the story this morning, right? There is still the Netflix story and people sort of trying to figure out exactly what is going on with Netflix over the short and then over the longer term. And then there's the Ackman sort of sideshow part of it, right, who is a very well-known investor, who is very public with his investments, to your point, and announced that he was taking this stake just at the end of January.

January 26 is when he first disclosed the stake of more than 3.1 million shares. So this was a quick turnaround and a quick loss for him. He lost $430 million on that stake. So what's the sort of takeaway from that? I've seen some praise for him this morning that he was nimble and sort of said mea culpa quickly--


JULIE HYMAN: --took the losses and moved on. That quote that you read from his statement from his letter to shareholders was interesting because he did go on to say, Netflix, over the very long-term, could very well do great. But the dispersion of outcomes is too wide for our comfort. In other words, it could do great, but it might not.

And he pointed out that in his fund, the positions are quite concentrated, so they want a higher degree of certainty. So if somebody is coming in and buying Netflix as it continues to fall here, to his point, over the very long-term, it could do well, but it is not the sort of sure thing that it once looked like to many investors.

BRIAN SOZZI: Well, I will pour a little bit of cold water, Julie, on that nimble, whoever is saying that. He took a beating in the stock. He was absolutely just crushed on this investment. I went back to what he was talking about, Julie, back in January, when he took that stake. He was attracted to Netflix because of the scale of its streaming business, was also upbeat on the pipeline of content. So in the matter of three months, that completely changed. It's just a bad look. Not a good look for Bill Ackman.

JULIE HYMAN: Well, he's not alone in making that mistake, clearly. I mean, you know--

BRIAN SOZZI: But he's supposed to have some of the best intelligence in the room. It's Bill Ackman.

JULIE HYMAN: I guess so. I don't know. I mean, like, everybody makes mistakes, and he's made some high profile ones. And he's had some winners also. I mean, I'm not his investor, so.

BRIAN SOZZI: That's why you're doing good today, Julie, among many reasons.

JULIE HYMAN: It's easy for me to say, I suppose, that this was a nimble thing for him to do. The year is young, anyway, so he's down 2% on the year because of this, but we'll see how it shakes out in the end.