William Ackman sold off $1.1 billion bet on Netflix on Wednesday, locking in a loss of more than $400 million after the global streaming service stock declined following news that it has lost subscribers for the first time in a decade.
Ackman’s hedge fund Pershing Square Capital Management made a sale of 3.1 million shares it had bought just three months ago as Netflix’ shares tumbled 35% to $226.19.
In a brief statement announcing the move, Ackman said proposed business model changes of including incorporating advertising and going after non-paying customers is rational but uncertainty lies in the short run.
“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.
Ackman took loss of more than $400 million rather than wait to see things to improve at Netflix.
Earlier Netflix during its earnings announcement said it had lost 200,000 subscribers in the first quarter falling short of expectation that it would add 2.5 million subscribers. Its decision in early March to suspend service in Russia after it invaded Ukraine resulted in the loss of 700,000 members.
“One of our learnings from past mistakes is to act promptly when we discover new information about an investment that is inconsistent with our original thesis. That is why we did so here,” Ackman wrote.