Netflix CEO To Whitney Tilson: "Cover Your Short Position. Now"

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Mon, 12/20/2010 - 09:54 | 818398 Oh regional Indian
Oh regional Indian's picture

Is there enough breadth of ownership in NFLX to cause a run if it were so decided?

Retail investors get out first? Cause a run on NFLX!

You can do it.


Mon, 12/20/2010 - 09:55 | 818399 bobert
bobert's picture

I'm speechless......

I purchased Netflix service a year ago.

I wish I had purchased their stock at the same time.

Mon, 12/20/2010 - 10:32 | 818452 pan-the-ist
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Same here.  I have a cable modem and netflix (no cable service), the kids watch blues clues all they want.  Occasionally I will send for a DVD.  If netflix can make money on my @9.99 a month, WTF did the cable company do with the $100+ more a month I used to give them?

Mon, 12/20/2010 - 10:38 | 818468 bobert
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Blues Clues; Wiggles; and Veggie Tales @ my house!

Wild and crazy........

Mon, 12/20/2010 - 10:47 | 818486 RKDS
RKDS's picture

Buying infinite and ever-expanding copyright laws from Congress is expensive, as is paying/extorting for their "right" to be a local monopoly.

Mon, 12/20/2010 - 11:20 | 818529 bobert
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It's too early in the morning for moral arguments.

I need a cup of coffee first!

Mon, 12/20/2010 - 11:12 | 818518 -Michelle-
-Michelle-'s picture

We just switched to their $7.99 streaming only after I realized that the DVD I have on my countertop has been sitting there for, oh, about 4 months or so.  We don't watch a lot of TV.  When we do, we're pretty sure to be interrupted within minutes.  Netflix is perfect for us and for our budget.

In the current economy, I would expect them to gain more customers as people realize that their cable and satellite service is full of expensive crap.

Mon, 12/20/2010 - 14:48 | 819024 goldfish1
goldfish1's picture

I like the Blockbuster $1 per night new release available at the grocery store. Saves $$$ and time. Who doesn't need milk bread eggs lettuce fruit? Family video...on the way down in our can you justify the overhead and payroll?


Perhaps they should put them in Speedway or WAWA or Circle K. Wow, what a brilliant idea.

Mon, 12/20/2010 - 13:53 | 818865 blunderdog
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Just to be fair: the cable company has to maintain the infrastructure that Netflix uses for free, and that requires a fairly large base of service employees.

That's pretty expensive.

It'd be interesting to see how things played out if cable-providers started failing because of declining base of high-margin subscribers.  Could Netflix remain in business without them?

Mon, 12/20/2010 - 15:44 | 819220 pan-the-ist
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Netflix doesn't use it for free, I pay the cable company for their service - how many times must the cable companies be compensated for this service?

Mon, 12/20/2010 - 21:23 | 819921 blunderdog
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You're paying the cable company to maintain that infrastructure for you.  If Netflix was your ISP, you'd tack on another $40-$70 to the subscription price.  That's the point.  Did you really not understand that?

Although no one actually does it, a cable provider provides effectively unlimited data-bandwidth for delivery of teevee.  Your Internet connection can't handle that.  If you had 100 teevees all plugged in to your cable box, you could watch 100 different full-motion video pictures.

You're not going to pull that off with Netflix over a basic 5-10Mbit connection.  You can buy increased bandwidth, sure, and that starts to cost a lot more.

Don't get me wrong--I'm all for hating the cable companies.  Haven't had teevee for a decade, myself.  But you asked a question above that grossly misrepresents the comparison.

Tue, 12/21/2010 - 09:44 | 820587 pan-the-ist
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I don't have 100 TVs, I only have 2.  I would guess that one would need 5 to 7 Mbit per TV.

Netflix isn't my ISP.

I pay for my bandwidth and bandwidth is (and should be) getting cheaper.

What's your point again?

Tue, 12/21/2010 - 14:00 | 821434 -Michelle-
-Michelle-'s picture

Not sure I understand the argument either.  I pay my cable company roughly $70 for internet and limited basic cable.  It's almost the end of the month.  According to my account information, I've yet to use half of my high-speed internet data allowance. 

Why should Netflix get an additional charge from my cable company again?

Taxes are used to build and maintain roads.  Auto manufacturers distribute products that use up space on those roads and cause wear and tear.  Should municipalities charge manufacturers a fee per car sold in order to help maintain infrastructure?

Mon, 12/20/2010 - 09:55 | 818401 TexDenim
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When the CFO of a mail-order company tells you to cover, you cover, right? Or is Netflix incredibly overvalued?

Mon, 12/20/2010 - 09:59 | 818406 SheepDog-One
SheepDog-One's picture

Hey only a 100 PE, Im sure its TOTALY justified and not a bubble or anything, due for big ups.

Also, just buy the f'n dips.

Mon, 12/20/2010 - 10:02 | 818402 Oh regional Indian
Oh regional Indian's picture

Cause a run on NFLX!

Move gains into PM's.

Double system whammy!

This could be ZH's Max Kieser movement/mement!


Mon, 12/20/2010 - 09:58 | 818405 The Answer Is 42
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Well can't blame him for doing his job, which is managing a one-stock hedge fund.

Mon, 12/20/2010 - 09:59 | 818407 firstdivision
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Hey, even Paulson & Co. lost money in the beginning of their massive short with the Advantage Fund.  I am certain that Tilson will eventually be right. The only thing is how much longer for this to top. 

Right now it looks like POMO's have been directed at putting a lid on the commodities.  Oil should be closer to $95 right now, but there seems to be a lot of resistance at $90 (as that makes the administration show that it is failing).  Wonder what equity outflows will look like when this new bubble breaks in the next year or two?  Getting massively burned thrice should make people realize they were duped into the most massive ponzi. 

Mon, 12/20/2010 - 10:08 | 818419 eigenvalue
eigenvalue's picture

Well, oil perhaps is a bit anaemic at the moment but look at sugar, cotton and other agricultural products. A drought is developing in Argentina. Guess next year, agricultural products will perform even better.

Mon, 12/20/2010 - 10:14 | 818426 firstdivision
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You are correct and that just shows how much further a fair amount of commodities will run from here.  I still believe that the recent POMO's have mostly been used to try to put resistance into the commodities to prevent a further run up.  With the further upward pressure, they will snap like a rubber band again with limit up days happening frequently. 

*regarding the Advantage Fund comment*

Let's not forget that when Paulson put on his housing sector short, there was a lot of posturing from "knowledgeable" people that housing was not a bubble and was strong.

Mon, 12/20/2010 - 10:30 | 818442 eigenvalue
eigenvalue's picture

I haven't studied the fundamentals of Netflix so I can't comment too much on this company. But I think we shouldn't think that people like Paulson are correct all the time. We had better do our own research and make our own judgment instead of copying others' strategies.

Mon, 12/20/2010 - 10:41 | 818473 firstdivision
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You are correct, we cannot believe that those that bet against are always right.  The issue with NFLX is that they are under the assumption that they cannot be charged extra for bandwidth, and that consumers will not be charged extra for bandwidth. 

While right now those views seem valid, the problem is with 2011.  I see the biggest threat to them are the ISP's.  ISP's are trying to boost their revenue streams as well. 

Mon, 12/20/2010 - 10:45 | 818476 firstdivision
firstdivision's picture


Mon, 12/20/2010 - 10:23 | 818427 firstdivision
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*wtf...another duplicate.  I only hit save once, and I did not hit refresh.*

Mon, 12/20/2010 - 11:09 | 818516 Al89
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And a possible civil war in Ivory Coast will make people's chocolate bars a little more expensive to say the least.

Mon, 12/20/2010 - 11:45 | 818570 Iam_Silverman
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"And a possible civil war in Ivory Coast will make people's chocolate bars a little more expensive to say the least."


Except for the fact that Armajaro (Anthony Ward) is dumping their big acquisition form the summer.  It seems like their (his) bet on a smaller than average yield this year was a bad call.  Armajaro had gathered quite a position, and then took delivery, roiling the markets and getting a lot of publicity.  Too bad you can't sell publicity - it would have made up the difference in the beating they are taking now as they unload their 240,100 tons of cocoa.

So, it may not look so grim for the chocoholics after all!

Mon, 12/20/2010 - 10:10 | 818409 firstdivision
firstdivision's picture


Mon, 12/20/2010 - 10:05 | 818412 buzzsaw99
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From a customer perspective netflix seems a fair value, for now. As for NFLX stock and CEO one thing is sure, Hasting and other insiders will become filthy rich no matter what happens.

Mon, 12/20/2010 - 10:05 | 818415 RobotTrader
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Shorting strong stocks on a strong tape is pretty stupid.

If anyone wanted to be short stocks, they should have shorted the weak ones, not the strong ones.

Here's an example:

Mon, 12/20/2010 - 10:18 | 818431 buzzsaw99
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The only weak company you could think of was a small cap?

Mon, 12/20/2010 - 11:17 | 818523 firstdivision
firstdivision's picture

I am still waiting for CMR to pop.

Mon, 12/20/2010 - 12:20 | 818621 Bay of Pigs
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Predictable. I assume you will be on the right side of the trade if Netflix corrects? And you badmouth the miners as the "get righ quick" crowd. What a joke.

Mon, 12/20/2010 - 12:39 | 818657 Dismal Scientist
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Shorting momentum stocks is a fast way to lose money. Most funds cannot take the unrealised losses mounting up in a liquidity driven environment. Shorting tends to work far better for business models which have been proven to be broken, ie: Blockbuster. Netflix ate their lunch, they were the short.

Mon, 12/20/2010 - 14:18 | 818944 IQ 145
IQ 145's picture

 Don't pay any attention to these negative comments; you have a really pretty bra, and that's the important thing.

Mon, 12/20/2010 - 21:47 | 819953 unununium
unununium's picture

The mark of the momo trader.  Buy high, sell low.

Mon, 12/20/2010 - 10:05 | 818416 SpeakerFTD
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Compared to some of the shriller responses of CEOs defending faulty business models,  I thought that was a pretty classy response. 

In essence, I agree with both heart of both arguments.  NetFlix has a nice business model.   It is a good business.  It is also widely overvalued by the stock market.

Here's to hoping that both NetFlix has a long, prosperous future as a media company, and that Tilson gets paid for calling shenangians on the mo-mos.


Mon, 12/20/2010 - 10:31 | 818447 Al89
Al89's picture

I think the response had a very arrogant tone to it. I also think the latest earnings call, judging by the transcript, sounded a little arrogant, but some how less assured than other calls.

The financial statements look weaker, sure they added 2million new subs in Q3 but their income dropped and their margins were squeezed badly. This stock may not be a bad company but it is overvalued and in a highly competitive market.

This response makes me feel more confident in holding my puts. Hastings is not a philanthropist, he doesn't want to save anyone short his stock any money, a CEO in charge of a company in which he has total confidence should not need to make these petty statements on forums like SeekingAlpha. 

Mon, 12/20/2010 - 10:38 | 818467 SpeakerFTD
SpeakerFTD's picture

I agree with you there.  The tone reminded me of the The Ben Bernank as he uttered his 100% confidence call. 

As the old saying goes,  hubris goeth before a 15% gap down open.



Mon, 12/20/2010 - 14:05 | 818907 IQ 145
IQ 145's picture

 A quiet smile, and "no comment" would scare the "short" out of the shorts. He needs a new pr guy.

Mon, 12/20/2010 - 15:04 | 819083 Bartanist
Bartanist's picture

Agreed. In a world where performance and fundamentals mattered a CEO should not care about stock price because stock prices would take care of themselves as performance improved.

However, in this world, it is not performance and fundamentals that matter, but those with financial weapons aimed at the back of your head and those with an implied threat always on their lips that matter. When one gets in bed with snakes and spiders, it is best not to fall asleep. (of course only a desperate man would get in bed with the snakes and spiders in the first place)

Mon, 12/20/2010 - 10:54 | 818477 Al89
Al89's picture

goddamn multi posts. NFLX must be hogging all the bandwidth again. 

Mon, 12/20/2010 - 10:52 | 818478 Al89
Al89's picture

delete. Post was meant to be in response to the guy below me.

Mon, 12/20/2010 - 10:47 | 818482 Al89
Al89's picture

multi post.

Mon, 12/20/2010 - 10:10 | 818423 monopoly
monopoly's picture

I always find it intersesting when a CEO lashes out at any wall street analyst. My experience advises there is something wrong when they do that and it is just a matter of time before the stock moves lower.

But, am not short any, have not been for months and may have to review shorting stocks again since I almost forgot how to short.

Mon, 12/20/2010 - 10:12 | 818424 max2205
max2205's picture

-15% from the the dip?

Mon, 12/20/2010 - 10:25 | 818437 bobert
bobert's picture

Netflix is paying for space on ZH along with some other 

companies that I respect like BMW & AMTD.

They must be pretty smart.

Mon, 12/20/2010 - 10:36 | 818463 pan-the-ist
pan-the-ist's picture

Zerohedge's add agent (I think) searches your cookies to see what you're interested in and presents and add accordingly.  Nothing overly magical...

Mon, 12/20/2010 - 10:42 | 818474 bobert
bobert's picture

Oh. I get it.

Makes sense.

Still good companies :)

Mon, 12/20/2010 - 13:48 | 818850 TheProphet
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So you're getting gay porn ads?

Mon, 12/20/2010 - 14:07 | 818916 IQ 145
IQ 145's picture

 Yeah, good ones too.

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