Short sellers betting against Netflix Inc. (NFLX) are up US$802 million, according a report by financial analytics firm S3 Partners LLC.
The streaming giant reported second-quarter earnings after the closing bell on Wednesday, shocking investors with a drop in U.S. customers and slower foreign market growth.
Netflix exited the quarter with 151.56 million global streamers, inching above the 150 million mark for the first time. However, streaming paid net additions totalled 2.7 million, versus 5.06 million expected by Bloomberg-compiled consensus data. Domestic subscribers fell by 126,000, versus an expected 309,240 gain. International subscribers climbed by 2.83 million, versus an anticipated gain of 4.75 million.
Speaking on a conference call with analysts, chief financial officer Spencer Neumann blamed the quarterly “choppiness” on a weak content slate, higher prices and seasonality.
Shares fell 10.51 per cent to $324.65 in pre-market trading in New York at 9:19 a.m. ET on Thursday.
S3 partners found Netflix is the third largest U.S. equity short, behind Tesla Inc. (TSLA) and Apple Inc. (AAPL), at US$6.79 billion or 18.55 million shares shorted, representing 4.33 per cent of its float.
“NFLX shares shorted increased by 4.7 million shares, 33.88 per cent, in 2019 with half the increase in short selling occurring in January,” wrote S3 Partners’ Ihor Dusaniwsky on Wednesday.
“With NFLX down almost $40 per share in aftermarket trading, shorts are up another $737 million on the almost 11 per cent drop in stock price. In total, short sellers are up $803 million in mark-to-market profits. Today’s stock moves more than halved their year-to-date losses and NFLX shorts are only down $743 million for the year.”