Pershing Square Share Discussion Threads

[pol123] 27/1/2022 08:50

NFLX buy UMG a possibility - streaming music that can only be viewed via NFLX. Im sure there is an angle and its not just to buy a streaming TV service

[williamcooper104] 27/1/2022 08:50

Of course the huge benefit of PSH is that if you don't like it you can sell Which you can't as an LP

[williamcooper104] 27/1/2022 08:49

Post the big dip they were (from memory) 35x next years forecast "profits" - profits being artificially inflated by dodgy content accounting - so I'm guessing it's 40 something on true free cash earnings

[williamcooper104] 27/1/2022 08:47

The hedge disappearing I like - as it could have easily gone out of the money Remember the genius of the CDS was only one part putting it in place; the other part was in getting out - if he'd held it all the profit would have gone when the fed went crazy with liquidity

[pol123] 27/1/2022 08:47

NFLX & UMG, must be a strategic link.
Content ownership is an attraction

[williamcooper104] 27/1/2022 08:45

I'm holding nose and topping up

[williamcooper104] 27/1/2022 08:44

That's another reason why I hate NFLX - it's accounting treatment of content is wrong They (from memory) amortise it over 4 years - when in reality it's not capex - it's an operating expense - stop spending on content and the platform dies in months Accept that when they get to a stabilised content spend then their accounting treatment will matter less as will get same P&L charge however they expense it The potential upside is that above a set level of content spend they should have operating leveraged and thus outsized profits - but if that's realised I think it just means very wealthy actors/directors will eat the profit

[rickyl1] 27/1/2022 08:43

Hmm, market doesn't like it this morning.The hedge all but disappearing, umg faltering, exposure to a faang stock and the concentrated portfolio all seem to point down atm. I'm sticking with it long term, Ackman is pretty agile and if he thinks something's not right he'll change it. If it goes below 2500 I'll be topping up.

[bmel] 27/1/2022 08:40

Williamcooper

Agreed Netflix will either succeed or be sold in the (inevitable) USA streaming consolidation process.

Also notable that they have taken a big drop after their last quarter results. Was that 'cheap' - time will tell but I guess Mr Ackman thinks so.

It was intersting to note that they had previously looked at it seriously before going for UGM.

[williamcooper104] 27/1/2022 08:21

Exactly my thoughts Streaming looks like owning a football club Great for the side benefits/ego of a club owner and of huge strategic importance for a big tech/big data company But a disaster in its own right as only ever a finite amount of talent that will be bid up by increasing streaming revenue Perhaps it's an M&A play; but then theres regulatory issues with one of the other FAANGs or similar buying Shall not be selling PSH though

[kinbasket] 27/1/2022 08:17

Agree about NFLX. I don't see the obvious attraction, the business model relies on increasing subs revenue forever. Except, maybe Bill sees it differently. The UMG investment is about the content. Maybe there is a future where the content Netflix own becomes the investment. Or something like that, maybe I just can't see far enough.

[donald pond] 27/1/2022 08:09

Crumbs, NFLX? Great product but can it ever make the profits to justify its valuation? I was just thinking the other day how I didn't know any funds that owned NFLX, now I blinking own one.Not what I would have done, but then I guess the whole point of PSH is you have to trust Bill, but NFLX???

[williamcooper104] 27/1/2022 06:28

Positive - those in the money swaps where hugely volatile and could actually lose money (from their current/recent mark) if the fed hikes aggressively and the yield curve inverts Just don't see the attraction in NFLX

[rambutan2] 27/1/2022 03:11

"In order to fund our purchase of Netflix, beginning on Friday and over the last few days, we unwound the substantial majority of our interest rate hedge generating proceeds of $1.25 billion. We retained interest rate swaptions that are currently out-of-the-money, and also purchased some additional longer-dated, out-of-the-money swaptions. The result of all of the above is that the notional size of our interest rate hedge has been reduced by 80%, the term of a substantial portion of the hedge we retain has been extended, and our dollar investment in hedges has been reduced by more than 90%.

Had we not sold the hedge, we could have likely realized more gains based on the increase in rates, largely today, since our sale. That said, we believed the opportunity to invest in Netflix at current prices offered a more compelling risk/reward and likely greater, long-term profits for the funds."

[williamcooper104] 26/1/2022 23:55

Seems that NFLX is funded by cashing in the interest rate hedges

[williamcooper104] 26/1/2022 23:53

Struggle to see attraction of NFLX - it's like a football club where all extra revenue goes to the content

[lomax99] 26/1/2022 22:45

PSH buys 3.1m Netflix shares in the dip:Https://assets.pershingsquareholdings.com/2022/01/26170421/Pershing-Square-Capital-Management-L.P.-Releases-Letter-to-Investors-01-26-2022.pdf

[pol123] 18/1/2022 13:24

Thanks guys, lets hope he times this right as NAV is taking a bit of a hit with our current holdings

[williamcooper104] 18/1/2022 12:53

A swaption is an option to enter into a swap (which is a long term fix on interest rates) You pay a premium for this and if it expires worthless then that's your total loss However before the swaption expires it's value will move all over the place - and if rates go higher it's market value will go higher to - as you could exit the swaption and cash in on that higher value So if it expires/goes out of the money then there could well be a hit from the current PSH NAV

[riverman77] 18/1/2022 12:19

My understanding is that it is an interest rate swaption which would pay out in a big way if rates sold off heavily, otherwise it would expire worthless (think of it as an insurance contract to cover a major bond market sell off). Don't have the details of the actual terms and don't think these have ever been divulged. The key thing (from my understanding) is that any loss from the expiry of the contract would be fairly minor.

[pol123] 18/1/2022 12:01

Does anyone have an idea of what the interest rate hedge would pay against certain interest rate levels. Not sure what tools are being used, but interested to understand the detail

[rickyl1] 13/1/2022 13:42

Nice concise, up to date pie chart.

[donald pond] 13/1/2022 07:44

PSH were one of Liberum's picks for 2022, and I've cut and pasted their pie chart showing the holdings onto my twitter thread as its the most detailed summary I've seen.

[lomax99] 10/1/2022 15:21

Small top up for me.

[apple53] 07/1/2022 12:01

Does anyone have anything detailed and up-to-date on holdings? I am working off the August 17th performance attribution table in the H1 report so I do not have uptodate info nor detailed size of holdings even then.

We now have end December NAV, and some significant holdings have fallen sharply since then. Other than Universal (down!) the interesting question is how large the restaurant holdings (down) vs Fannie and Freddie (up) and the interest rate plays.

NAV could be £40-41, down from £42-3. Still masses of upside, of course. I own, but could sell something to buy more.

I appreciate we will find out a new NAV pretty soon, presumably by Tuesday.