Insiders of Netflix (NFLX) rarely tend to purchase shares of the company but when they do, I pay attention. The last time we saw an insider buy shares was in August 2019 when we saw Director Brad Smith purchase $2 million worth of shares at an average price of $308.49 per share. Mr. Smith had served on Netflix’s board since March 2015 and this was his first purchase. The most memorable insider purchases of Netflix or of any company for that matter were the purchases by the Venture Capitalist and long-serving Director Jay Hoag who purchased shares in 2012 and 2016 both for his own portfolio (2012) as well as for his firm Technology Crossover Ventures (TCV). I wrote the following about Mr. Hoag’s purchases in February 2016,
TCV is a well known venture capital company that mostly invests in private companies but sometimes ventures into public markets. The company first invested in Netflix (NFLX) back in 1999 and Mr. Hoag’s purchase of Netflix shares in May 2012 at prices in the low $70’s (pre-split) were one of the best instances of insider purchases I have seen since I started tracking this data more than 5 years ago. Netflix shares had dropped dramatically before Mr. Hoag’s purchases on news that the company was going to split itself a DVD mailing service called Qwikster and a streaming service. Much to the relief of investors, the company eventually abandoned that plan and the stock eventually went up 10 fold. Unfortunately for TCV, they did not hold through that entire 1,000%+ increase.
Jay Hoag’s NFLX Purchases (click to enlarge)
Netflix has gone on to more than quadruple from the time I wrote that in 2016 despite the recent pullback. Mr. Hastings’ purchase of Netflix is his first insider purchase since we started tracking insider transactions in 2010. The reason this purchase is all the more remarkable is that Mr. Hastings didn’t buy shares even during the depths of the 2008-2009 bear market. I found a form 4 filed by him on February 26, 2009 when he sold shares at a split-adjusted average price of $5.07 per share. Netflix split its shares 7 for 1 on July 15, 2015. The market bottomed just a few days later.
Bill Ackman’s Pershing Square Capital indicated in a shareholder letter that they had in recent days acquired 3.1 million shares of Netflix, making them a top 20 shareholder of Netflix. The reason Messrs. Hastings and Ackman are buying shares has to do with the greater than 37% plunge in Netflix stock during the last month thanks to a rotation away from growth stocks and Netflix’s fourth quarter new subscribers number coming in at 8.28 million instead of the forecasted 8.5 million. The bigger shock was probably Netflix’s guidance of 2.5 million new subscribers in Q1 2022. Ensemble Capital does a great job of breaking down this overreaction to subscriber number in their post Netflix’s Man Overboard Moment.