Pershing Square Capital Management takes new position in Netflix Inc

With Netflix Inc’s shares touching a new low last Thursday, William Ackman has built a new stake worth $1 billion in the streaming service company.

In a message to investors, Ackman said his hedge fund, Pershing Square Capital Management, had started buying shares in the company and now owns more than 3.1 million shares placing Pershing Square among the top 20 shareholders.

In a letter to clients, Ackman praised Netflix as having the “best-in-class management team”; in a tweet he said he has long admired Netflix’s CEO Reed Hastings and the “remarkable company he and his team have built.”

Netflix’s shares has climbed as much as 5% in after-hours trading. In the last five days, it had fallen by more than 30% midst a broader market tumble.

“Now with both UMG and Netflix, we are all-in on streaming as we love the business models, the industry contexts, and the management teams leading these remarkable organizations,” said Ackman.

To raise the cash needed to make the purchase of Netflix shares, Ackman had unwound a big piece of its interest rate hedge which generated profits of $1.25 billion.

He went on to add, Netflix benefits from highly recurring revenues and that the company has pricing power and delivers industry-leading content.

Pershing Square traditionally holds only a small number of investments which currently include Lowe’s, Chipotle Mexican Grill, and Dominos Pizza Inc.

“These companies are high quality businesses that can withstand inflationary pressures because they are able price their products to preserve profits”, said Ackman.

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