Pershing Square Holdings Tells Shareholders It Sold Netflix Stake

By Stephen Nakrosis

Pershing Square Holdings, Ltd., in a letter to shareholders, said Wednesday it sold its investment in Netflix Inc.

The company said it had high regard for Netflix's management, but added "in light of the enormous operating leverage inherent in the company's business model, changes in the company's future subscriber growth can have an outsized impact on our estimate of intrinsic value."

Pershing Square said planned changes by Netflix, including incorporating advertising and being more aggressive in going after non-paying customers, while sensible, make it difficult to predict their impact on the company.

"We require a high degree of predictability in the businesses in which we invest due to the highly concentrated nature of our portfolio," Pershing Square said. It also said "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."

The company said the loss on its investment reduced year-to-date returns by four percentage points. "Reflecting this loss, as of today's close, the Pershing Square Funds are down approximately 2% year-to-date," the company said.

Netflix shares touched a 52-week low on Wednesday, after the company said it lost subscribers in the first quarter. The stock ended the day with a 35.12% loss, closing at $226.19 a share. Earlier in the session, it touched a 52-week low of $212.51 per share.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com

(END) Dow Jones Newswires

April 20, 2022 19:04 ET (23:04 GMT)

Pershing Square (EU:PSH)
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