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Whitney Tilson Responds To Netflix CEO's Response Of Tilson's Critique
The theater of the macabre goes one further following the just released response by Whitney Tilson to this morning's attempted rebuke of the short Netflix thesis by Reed Hasting. StreetInsider cites Tilson, who told the breaking news site the following: ""I'm glad Reed Hastings took the time to reply to some of the issues we raised. He made a number of good points and helped us -- and other investors -- understand him and his company better. I think a friendly, respectful debate like this is healthy and wish there was more of it." We are now holding our breath until we get Reed's response to this follow up response, to his original response, over just how overvalued his company is. Ironically, we don't really see what the reason for this theatrical acrimony is: after all it is pretty obvious that both Hastings (and the firm's CFO prior to his surprising resignation recently) and Tilson are on the same side of the trade.
And it wouldn't be complete theater if the other noted short seller of NFLX, Manuel Asensio, did not chime in as well:
Asensio told StreetInsider.com "I find it extremely irregular and disrespectful."
He calls the letter from Hastings, "reflective of the poor and questionable disclose which has led to the informational insensitivity of the stock."
Asensio describes informational insensitive stocks as those that don't respond to prevailing Wall Street opinion. In the case of Netflix, the prevailing logic is that the stock is overvalued, yet the stock does not respond to this wisdom and keeps going higher. Even CEO Hastings himself described the valuation of the stock in his letter today as "substantial."
Mr. Asensio called it the responsibility of the Board of Directors to monitor Mr. Hastings irresponsible actions in this matter and in others. He said Mr. Hastings' wording in the response was custom tailored to create a short squeeze in the stock.
Mr. Asensio reiterated his view, expressed in a recent CNBC appearance, that the company can never make the fictitious Wall Street estimates. He also promised to become much more involved in the stock.
At the end of the day, it is very likely that both Hastings and Tilson are correct. The problem, as very often happens, is that both will be proven right only after it is too late: with a massive short interest in NFLX, all it will take is some piece of "news" to appear and force Tilson to cover at a massive loss, promptly followed by another piece of reality hitting (or, heaven forbid, the Chairman announcing he is withdrawing liquidity, and no longer fully endorsing triple digit forward multiples) and wiping out all the longs' profits. But hey, it's called a ponzi casino as now even John Hussman confirms, for a reason...
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During the NASDAQ/Internet bubble, it was hard to find an Assensio short idea that did not work out ultimately. I remember he put out a report on Winstar in which he said Winstar would eventually file for bankruptcy. At the time, it was a darling and the stocktards valued the equity in the multi-billions. He was right and the stock ultimately went to $0. Haven't followed him lately, but you have to respect his opinion.
http://www.asensioexposed.com/
Never has anything else been so aptly said on ZH as this. The only thing left off is that, having proven both men right...but too late...syndicate Wall Street bankers cash additional $100 million in bonus checks...
And also...happening again and again and again in full on sight of Average Joe, the credibility of the market, [on which we count for capitalism to continue to function] falls like the share price of a leveraged and inverted ETF...as those Creation Units Machines in the closets of syndicate Wall Street banks create and sell infinity shares...
P.S.
....with bailout money printed by The Bernank as America lurches towards Bananaville...
P.P.S.
...right before...criminal syndicate Wall Street bankers buy Lear jets and fly away...
P.P.P.S.
CAPITAL CANNOT FORM IN FIANANCIAL INSTITUTIONS AS CORRUPT AS OURS.
someone big buys netflix, another buys blockbuster.. some peons make $$$ many peons lose everything...
Hastings backs up his argument by holding not one penny of stock in NFLX.
http://insiders.morningstar.com/trading/insider-activity.action?t=NFLX®ion=USA&culture=en-US
might want to fact check that. pretty sure he still owns a decent amount of stock.
http://www.sec.gov/Archives/edgar/data/1033331/000121905310000198/xslF34...
I'm short long-term on this stock. Might see a short squeeze first though. From either the earnings call or the MD&A (I have this in my notes)...
'No more investment in content in Q4'.
Which would bring costs down and potentially provide the stock with renewed momentum, short squeeze. Then the shit hits the fan when everyone has been shaken out and they actually have to pay high fixed costs to the providers, as they have had to do in Canada.
This time it's different...
While I agree with T2's opinion on the stock, Reed Hastings still owns 1.3m shars per the filings as I read them. He has been selling 100k per quarter for the last several years and has cut his holdings in half since 2007.
I repost this for your view pleasure......One other note is whether these clowns will disclose the actual $7.99 paying streaming subs in 4Q. I suspect not cause they are probably under 4M at best.
In the past I have presented multiple pieces of antidotal evidence that NFLX has been misleading investors on the extent it is a streaming company. The latest of which is a non-scientific poll by http://www.hackingnetflix.com/ that shows that only 13% of its subs would trade down to the $7.99 streaming only package. If true this implies that the majority of their subs are not streaming subs and this is not in the words of Hastings a streaming company who mails DVD. ALSO if the NFLX subs are actually mainly DVD based subs who occasionally stream why is then that NFLX is granted an internet cos. all streaming valuation vs. CSTR at a 50 P/E vs. under 20? If am correct the street is granting the company a streaming P/E when it should still receive primarily a legacy DVD P/E.
Past evidence is as followed for your review…..
1) Sandvine Networks study implies NFLX streaming subs that represent 20% of primetime traffic are actually under 1M.
2) NFLX hiring actors to fool investors on Canadian launch.
3) NFLX vague definition of extent of its subs streaming then announcing it will no longer disclose stat.
4) NFLX representing <1% of AKAM’s revenues.
5) Announcing a streaming only plan AFTER the fact of convincing investors that it’s a streaming company.
6) Extension of free trial period to a mth from 2 weeks.
7) Free sub rise as a percent of new subs in recent qrts and relative to 4Q guidance.
8) Actual cord cutting subs in total across all legacy cable MSO amount to a few hundred thousand.