This billionaire investor booked a $400 million loss on his billion dollar Netflix investment

• Billionaire investor Bill Ackman has pulled out from his Netflix investment, taking a massive $400 million hit.
• Earlier, Netflix reported a disappointing March quarter, losing subscribers for the first time in the last decade.
• Netflix shares took a massive beating on Wall Street, plunging over 37% and wiping out over $50 billion in investor wealth.

Netflix shares have taken a huge beating after the streaming giant revealed its first subscriber loss in a decade, wiping out over $50 billion investor wealth in one go.

Now, billionaire investor Bill Ackman’s hedge fund Pershing Square has sold its $1.1 billion Netflix investment, taking a massive hit of $400 million in the process.

The hedge fund had invested in Netflix earlier this year, and while we don’t know their exact buying price, a loss of nearly 40% when Netflix shares also plunged by over 37% suggests that the fund made the Netflix investment in the $350 range.

Post the 37% single-day decline, Netflix shares ended the day at $226. Merely six months ago, the Netflix share price was around $700, signalling that the investor sentiment has turned negative.

Some of the reasons that Ackman’s hedge fund has cited in its letter to its investors are the announcement of Netflix cracking down on password sharing, and the proposal to launch an ad-supported subscription model.

‘We have lost confidence’, says Ackman’s hedge fund

“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,” said the letter by Ackman’s hedge fund.

Pershing Square currently has over $21 billion in assets under management. It made its investment in Netflix earlier this year after the streaming giant reported a disappointing subscription forecast in January.

Now, with Netflix having lost over 200,000 subscribers, and its shares plunging 37%, the fund house has decided to book its losses and exit.

Earlier, Netflix had projected “disappointing” 2.5 million subscriber additions for the March quarter. It ended up losing over 200,000 subscribers, and suspending its services in Russia led to a loss of 700,000 subscribers.

Cracking down on account sharing, ad-supported subscriptions and more on the way

Announcing the March quarter earnings, Netflix revealed that it will take steps to crackdown on account sharing. Netflix says over 100 million households use account sharing, with a third of those in the US alone.

In addition to this, Netflix chief Reed Hastings also announced that the company is exploring an ad-supported subscription tier, stating that he is a “bigger fan of consumer choice” than he is against the “complexity of advertising”.

This might suggest that there could be a cheaper ad-supported subscription option, likely limited to one device. It’s not clear if Netflix will bring ads to other higher priced subscription options.

Netflix seeing an ‘uptick’ in India

After slashing prices drastically in India, with the base plan starting at just ₹149, Netflix revealed that it is seeing an uptick in India.

"The product fit incorporates subscription prices as well as willingness and ability to pay. So we have seen a nice uptick in engagement in India. We are definitely taking it in the right direction," Netflix co-chief executive Ted Sarandos said late on Tuesday.

The company said it is making good progress in the Asia Pacific region, stating “we are seeing nice growth in a variety of markets including Japan, India, Philippines, Thailand and Taiwan.”

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