Ackman gives up on Netflix, taking $400 million loss as shares tumble

California, Apr. 21 (BNA): Billionaire investor William Ackman liquidated a $1.1 billion bet on Netflix (NFLX.O) on Wednesday, locking in a loss of more than $400 million as the streaming service’s stock plunged following news that it lost subscribers for the first time in a decade.

Ackman’s hedge fund Pershing Square Capital Management made an abrupt U-turn, selling the 3.1 million shares it had bought just three months ago as Netflix’ shares tumbled 35% to $226.19, Reuters reported.

In January, the investor funneled over $1 billion into the streaming service just days after a disappointing forecast for subscriptions pushed the share price lower. Now a second bout of negative news about subscribers – the company said it had lost 200,000 – prompted the fund manager to turn his back on a company he had showered with praise only weeks before.

In a brief statement announcing the move, Ackman said proposed business model changes, including incorporating advertising and going after non-paying customers, made sense but would make the company too unpredictable in the short term.

“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,” he wrote.

Pershing Square, which now invests $21.5 billion, buys shares in only about a dozen companies at a time and needs a “high degree of predictability” in its portfolio companies, Ackman said.