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If you want to get under the skin of Bill Ackman right now, without Harvard or Business Insider, just listen to his 2022 bet on Netflix. In late January of that year, hedge fund managers decided to jump straight into Netflix stock. If it comes under attack from investors dissatisfied with slowing growth, it will be a multi-layered disaster. Ackman not only financed the roughly $1.1 billion acquisition by liquidating interest rate hedges (which meant forgoing profits from rising interest rates, he admitted), but also bought Netflix in just three months. lost confidence in the company and sold it at a loss in April. Given the spike in interest rates after Mr. Ackman liquidated these hedges, he lost on both counts.
Netflix’s stock price has now rebounded to more than $490, about 33% higher than when Mr. Ackman bought it. Had he continued to hold the stock, he would now have earned about $375 million. This trip down memory lane isn’t about reminding the world of Ackman’s failures. He wasn’t the only one to sell Netflix at the time. After he left the company, his stock continued to fall for several months, hitting a low of $167. The point is how difficult it is to predict the future, especially when it comes to stock price movements. By mid-2022, it was clear that the market had overreacted to Netflix’s decline, but it wasn’t clear whether the stock would recover as much. (And it should be noted that it is still well below its all-time high of about $690 in late 2021.)
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