Netflix (NFLX) shares extended their two-day slump Thursday, following the stock's biggest single-day decline in early two decades, after billionaire investors Bill Ackman dumped his short-lived stake in the online streaming group.
Ackman, who began amassing shares in late January following Netflix's disappointing fourth quarter earnings, said late Wednesday that he's liquidated his entire $1.1 billion position, and is taking a $400 million loss, following the group's revelation that it had shed 200,000 subscribers over the the first three months of the year and expects to lose another 2 million by the end of the second quarter.
Around 700,000 of those were the result of cutting its service in Russia, Netflix said, but the bulk of the exodus was put down to rising prices, increasing competition and password sharing, which Netflix estimated at around 100 million households world wide.
Ackman said at the time that some of its best bets have emerged when rivals "discard great companies at prices that look extraordinarily attractive", adding that he'd been a long admirer of Netflix from both a corporate and a customer perspective.
"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," Ackman wrote to his Pershing Square Capital investors.
"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," he added. "That is why we did so here."
Netflix shares were marked 5.5% lower in pre-market trading to indicate an opening bell price of $213.80 each, a move that pegs its market value at just under $95 billion.
The stock has shed more than $200 billion in value over the past six months, and suffered its biggest single-day decline yesterday, falling 35.12% to the lowest level in three years.
Netflix's first quarter earnings were essentially solid, with a bottom line of $3.53 per share that came in firmly ahead of the Street consensus forecast of $2.89 per share and group revenues that were 10% higher than last year, at $7.87 billion, and just behind analysts' estimates of a $7.93 billion tally.
Netflix also said it expects to be free-cash flow positive for the 2022 year and beyond, with first quarter free cash flow rising 15.9% to $802 million.
