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...