Upholdings founder and portfolio manager Robert Cantwell discusses the billionaire’s $400 million loss on Netflix.
During an interview on “Mornings with Maria” portfolio manager Robert Cantwell weighed in on the Netflix stock, saying billionaire Bill Ackman’s exit contributed to the share price getting hit aggressively.
MORE ‘BLEEDING’ TO COME FROM NETFLIX’S STOCK AND BUSINESS, WARNS TECH EXPERT
Netflix’s stock takes a plunge (Photo Illustration by Soumyabrata Roy/NurPhoto / Getty Images)
ROBERT ACKMAN: It’s great that Bill puts his investment thesis out there when he buys something, and he put his investment thesis in his annual letter out there a couple of months ago on Netflix. And frankly, it was a pretty flimsy one. It lacked the level of unit economic depth that we’ve been accustomed to when Bill Ackman is getting involved in a real estate company or a retailer like Lowe’s or Starbucks. And so we think even leading up into the quarter, he was getting a lot of negative feedback on the position that he took as quickly and as aggressively as he took it. And rather than doubling down, he said, Well, let’s just get out of a category and take more time to learn it before we decide whether we’re going to leave our investors posted here. Now that said, we suspect that Netflix’s share price may have actually been more aggressively hit because of how quickly an investor like that takes, because it gets around on Wall Street when an investor is dumping like that. And that has an enormous impact on a single day’s trading volume, and that could have brought shares down quite a bit.
But the Netflix management team, they’ve got bigger problems to work through because they’ve been incredibly stubborn about sticking to a subscription only plan for all its content. And we’ve had a small position in Netflix over time. Our biggest hang-ups with them have been obviously the valuation has been high, but they’ve gotten to a level of content spend. That 200 million subscribers is not actually enough viewers for the amount of money that they’re spending on content. You know, they’re going to spend almost $20 billion in content acquisition in the next 12 months and 200 million viewers around the world. Frankly, it’s not actually a very big number on that volume of content spend. And so that’s why they’re getting a free ad tier. We think it’s also likely that they’re going to get into licensing their content to other potential channels or even linear television to help get higher returns on their content investment.
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Upholdings founder and portfolio manager Robert Cantwell weighs in on Tesla and Netflix stocks.
