Whitney Tilson Wins as Disney (DIS) Gives Netflix (NFLX) its Stamp of Approval

December 4, 2012 5:31 PM EST
Hedge fund investor Whitney Tilson is standing a little taller tonight after shares of Netflix, Inc. (NASDAQ: NFLX) surged 14 percent on it exclusive content deal with Disney (NYSE: DIS).

Tilson has been with Netflix through ups and downs, short and long.

His initial short beat on Netflix promoted a rare public response from CEO Reed Hastings. Shortly after Tilson covered the trade... at a loss.

Tilson was so convinced that Netflix wouldn't go down, he did a complete 180 and went long in a big way. His initial long bet proved rocky from the start. However, his fortunes have now changed. With the recent surge in the stock from today's news and Carl Icahn's recent stake, he appears to be sitting pretty. While it is not known Tilson's cost basis on the stock, putting together bits and pieces of information it is estimated to be around $70/share. This would suggest he is up about 24%.

In an e-mail response to StreetInsider.com, Tilson confirmed he is still long Netflix although he wouldn't comment on the specifics of today's deal.

To Tilson's chagrin, shorts are already spinning today's news. They say the likely cost of today's deal, which was not disclosed, is likely astronomical. They suggest a secondary offering could be forthcoming to pay for it. In addition, Netflix doesn't get new Disney content until its current deal with Starz (NASDAQ: LMCA) rolls off in 2016. Three years is a long time in the streaming business they say.

Nonetheless, while the short-term volatility in shares of Netflix will likely remain, shorts need to understand that Disney has just put its stamp of approval on the company. With the deal, they are saying Netflix will be around and viable for the long-term.

Tilson smiles.

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