California’s Pension Fund Saw $700 Million Go up in Smoke Following Earnings-Triggered Sell-Off in Netflix

California’s Pension Fund Saw $700 Million Go up in Smoke Following Earnings-Triggered Sell-Off in Netflix
A sign is posted in front of Netflix headquarters in Los Gatos, Calif., on April 20, 2022. (Justin Sullivan/Getty Images)

Netflix, Inc. shares suffered a bloodbath on Wednesday, having shed over 35 percent in a single session, following its disappointing quarterly results and weak guidance.

One of the largest U.S. pension funds, which held a chunk of the streaming giant’s shares, incurred a massive loss amid the plunge.

What Happened

The California Public Employees’ Retirement System lost about $695 million of its Netflix bets following Wednesday’s plunge. The largest state pension fund in the U.S., with $450 billion in assets under management, held 1,779,811 Netflix shares, valued at about $1.07 billion, at the end of the fourth quarter of 2021, 13F filing with the SEC showed.

At Wednesday’s closing price of $226.19, CalPERS' 1,779,811 shares are now worth $402.42 million. This suggests a $669.4 billion shave-off from the value of the fund’s holdings at the end of the fourth quarter.

Big investors are already jumping the Netflix ship. Billionaire investor Bill Ackman’s Pershing Square Capital Management exited its position, the hedge fund manager said in a letter to shareholders. The firm reportedly lost about $400 million of its Netflix bets.

Why It’s Important

A turnaround may not be imminent at Netflix, sell-side analysts say. Higher penetration rates and intensifying competition could leave the company struggling in the near to medium term.

Netflix pointed to some measures it is taking—including cracking down on password sharing, running an ad-supported subscription plan and investing in content. All these could take 18-24 months to fructify, KeyBanc Capital Markets analyst Justin Patterson said in a note. The analyst also said operating margins could remain subdued due to investments made to drive revenue growth.

A slew of sell-side firms took down their price targets for Netflix shares drastically and recommended staying on the sidelines.

After Wednesday’s more than 35 percent plunge, Netflix' shares were down an incremental 0.98 percent at $223.97 in premarket trading on Thursday, according to Benzinga Pro.

By Shanthi Rexaline

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