Famous Hedge Fund Billionaire Gets Smoked After Trying To Catch Falling Netflix Knife

Famous Hedge Fund Billionaire Gets Smoked After Trying To Catch Falling Netflix Knife


Photo: Billionaire investor William Ackman at the Economic Club of New York, Nov. 12, 2019. (AP Photo/Andrew Harnik)

Streaming giant Netflix said it lost 200,000 subscribers in the first three months of 2022, according to its quarterly earnings report released Tuesday, April 19. Netflix stocks plummeted as much as 37 percent on the news, and famed hedge fund billionaire Bill Ackman’s hedge fund management company potentially lost $400 million on paper after buying Netflix stock in January.

Ackman’s company, Pershing Square started buying Netflix shares on Jan. 21, the day the stock plummeted 25 percent due to a weak subscriber growth forecast, Business Insider reported.

Ackman got smoked trying to catch a falling knife.

A falling knife is a term used to describe a rapid drop in the price or value of a security. The phrase “don’t try to catch a falling knife” can be translated to mean “wait for the price to bottom out before buying it,” according to Investopedia.

The Netflix market capitalization shed $54.3 billion overnight, its largest one-day market cap loss on record, The Wall Street Journal reported. The price drop represented its biggest single-day percentage decrease since Oct. 15, 2004, when it fell 41 percent after announcing it would cut subscription fees and postpone international expansion.

Pershing Square had a stake in Netflix that was valued at $1.1 billion three months ago and is now worth about $700 million. 

Are you interested in getting smart on Life Insurance?
No Doctor Visit Required, Get Policy for as low as $30 per Month
Click here to take the next step

Netflix shares were trading at $215.18 as of this writing, down from an all-time high of $700.99 in early November 2021.

It is the second time Netflix’s shares tumbled this year. In January, Netflix shares dropped more than 20 percent when the company said it expected to add a much smaller number of subscribers than it did one year prior. The stock is down 62 percent this year, including April 20’s fall.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?

In all, Netflix expects its global paid subscriber base to shrink by 2 million users this quarter. It also lost 700,000 subscribers when it pulled out of Russia in protest over Russia’s war in Ukraine.

Ackman typically invests in real-world businesses such as Chipotle and Domino’s Pizza, but he has said he was a longtime admirer of Netflix co-CEO Reed Hastings and his company.

In January, Ackman said Netflix had an “attractive valuation” but on April 20 he wrote, “We have lost confidence in our ability to predict the company’s future prospects.”

Photo: Billionaire investor William Ackman applauds as President Donald Trump speaks at the Economic Club of New York, Nov. 12, 2019. (AP Photo/Andrew Harnik)