When it’s about money, friendship ends – what the vernacular has condensed into this saying, saturated with life experience, also applies to statements of all kinds. American mutual fund. Ackman made a bet three months ago. When you look at the $435 million the fund is now worth less, it’s hard to help but think that bet is a lost one.
The bet went like this: When shares in streaming service Netflix plummeted earlier this year, Ackman believed it would only be temporary. Or maybe he also believed that his entry and, above all, his wordy and hopeful statements about it would motivate others to see it the same way. And Ackman didn’t just get in a little. He became one of Netflix’s top 20 shareholders with an investment of $1.25 billion.
Joining Netflix was a good opportunity, Ackman said at the time. He praised the company’s character, subscription-based business model and great leadership team. Now, just three months later, it all sounds very different. Ackman wrote to his clients that he had learned from past mistakes to abandon bad investments early. In other words, he’s dropping Netflix like a hot potato.
In the special case, however, early meant writing 435 million dollars to the wind. As a result, the value of his fund fell by a whopping two percent this year, Ackman admitted in the letter to shareholders. He now wants to invest the money from the unfavorable sale in more worthwhile opportunities. Ackman will not become impoverished anyway, he will remain a billionaire, just like the founder and boss of Netflix, Reed Hastings.
The 61-year-old Hastings also had to retreat from earlier assurances given the rather precarious situation of his company. After losing customers for the first time, Netflix – once the acclaimed newcomer that terrorized the sleepy TV giants – must now do what it never wanted: allow advertising. Because the prospects for the near future are anything but rosy.
In addition, more action is to be taken against a practice that leads to many using Netflix without paying anything for it. You can pass on the access data, for example to relatives or friends. Or you share the costs and get to series and films cheaper. These are now also available from many powerful competitors such as Amazon, Disney or Apple. Netflix is one of many providers and will have to hold its own, experts say. Bill Ackman is not the only one who sees the chances of this not being very great.