Bill Ackman's Pershing Square has potentially lost $400 million on paper after buying Netflix stock in January

• Bill Ackman's Pershing Square may be down $400 million after buying Netflix stock in January.
• The hedge fund's stake, valued at $1.1 billion three months ago, is now worth about $700 million.

Bill Ackman has potentially racked up a $400 million unrealized loss on the Netflix bet he made only three months ago.

Netflix shares tumbled as much as 37% on Wednesday, after the video-streaming service reported a slowdown in revenue growth last quarter, and forecasted its subscriber base would shrink by 2 million users to below 220 million this quarter.

Ackman's Pershing Square bought about 3.1 million Netflix shares in just four trading days in late January, securing a 0.7% stake worth $1.1 billion at the time. The media stock's latest plunge has slashed the value of the hedge fund's position to about $700 million today — a roughly 36% decline.

Pershing Square started buying Netflix shares on January 21, the day the stock plummeted 25% due to a weak subscriber growth forecast, alongside a broader sell-off of technology stocks in the face of surging inflation and rising interest rates.

Ackman, who typically invests in real-world businesses such as Chipotle and Domino's Pizza, explained the wager by noting he was a longtime admirer of Netflix co-CEO Reed Hastings and his company. The billionaire investor also touted Netflix's subscription model, management team, pricing power, vast and diverse content library, stellar user experience, and its strong foothold in the fast-growing streaming industry.

Moreover, Ackman tweeted in January that he was "delighted" to finally have a chance to invest in Netflix at an attractive valuation. If his investment case hasn't changed, he might see Netflix stock as an even bigger bargain following its latest plunge.

Pershing Square declined to comment.

Netflix shares peaked at north of $700 in November. They have slumped by 69% since then, and fallen by more than 63% this year alone.

On Netflix's earnings call, Hastings and his team blamed the company's slowing growth on account sharing and fierce competition from newer services such as Disney Plus and HBO Max. They're exploring the roll-out of a cheaper, ad-supported pricing tier to revitalize growth, they said.