Whitney Tilson Got Conned by Netflix's (NFLX) Hastings
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Hedge fund investor Whitney Tilson is kicking himself hard Tuesday after his short thesis on Netflix (Nasdaq: NFLX) played out exactly how he thought. Unfortunately he was unable to capitalize at all. Tilson in fact covered his short position long ago and actually lost money on the trade.
While Tilson was shorting the stock, Netflix amazed Wall Street with blockbuster subscriber additions and profits quarter after quarter. To help combat this, Tilson became a very vocal short on Netflix, going on CNBC to explain his position and issuing comments to the media.
Tilson became so vocal that his short thesis was addressed publicly by Netflix CEO Reed Hastings in an open letter on SeekingAlpha.
In the letter, Hastings tried to persuade Tilson to cover his short. He said while Tilson only has to be right on one of the issues cited in his short thesis, he will likely be wrong on of all them.
Needless to say, Hastings was convincing enough and the continued surge in the stock price forced Tilson's hand to cover the bet.
Netflix's fall from grace came at the company's own hand. Management's ill-timed price hike and plan to separate the DVD business made customers extremely irate and they left in droves, leaving the company clueless and in a mess.
As they say "markets can remain irrational longer than you can remain solvent."
Shares of Netflix were at $180 when Mr. Hastings issued his letter to Mr. Tilson. Including today’s 35 percent swoon, shares are down 57 percent since that time.
Next time Mr. Tilson, don’t cover your short based on the word of a self-promoting CEO.
While Tilson was shorting the stock, Netflix amazed Wall Street with blockbuster subscriber additions and profits quarter after quarter. To help combat this, Tilson became a very vocal short on Netflix, going on CNBC to explain his position and issuing comments to the media.
Tilson became so vocal that his short thesis was addressed publicly by Netflix CEO Reed Hastings in an open letter on SeekingAlpha.
In the letter, Hastings tried to persuade Tilson to cover his short. He said while Tilson only has to be right on one of the issues cited in his short thesis, he will likely be wrong on of all them.
Needless to say, Hastings was convincing enough and the continued surge in the stock price forced Tilson's hand to cover the bet.
Netflix's fall from grace came at the company's own hand. Management's ill-timed price hike and plan to separate the DVD business made customers extremely irate and they left in droves, leaving the company clueless and in a mess.
As they say "markets can remain irrational longer than you can remain solvent."
Shares of Netflix were at $180 when Mr. Hastings issued his letter to Mr. Tilson. Including today’s 35 percent swoon, shares are down 57 percent since that time.
Next time Mr. Tilson, don’t cover your short based on the word of a self-promoting CEO.
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