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Netflix’s Plunge Gives Tilson Pyrrhic Victory: Chart of the Day

Sept. 21 (Bloomberg) -- Netflix Inc. has finally fallen below the stock price at which a hedge-fund manager made the case against the video-rental company in print and its chief executive officer rebutted him.

Whitney Tilson, a managing director and co-founder of T2 Partners LLC, wrote about why Netflix was his firm’s biggest bearish bet last December on the Seeking Alpha website. Reed Hastings, CEO of the Los Gatos, California-based company, responded on the site four days later.

The CHART OF THE DAY displays Netflix’s stock performance during the past 12 months, including its 38 percent plunge from Sept. 15 through yesterday. The chart includes the dates of the dueling posts, a CNBC interview in October in which Tilson said he was betting the stock would drop, and a follow-up posting he wrote in February after covering what was a money-losing bet.

“We haven’t had a position in Netflix for quite some time,” Tilson wrote yesterday in an e-mail. He then commented on the company’s plan to split the DVD-by-mail business into a separate company, Qwikster, and to focus on online streaming.

“This could pay off big time or be a disaster -- and anyone who claims to know for sure is deceiving themselves,” the New York-based investor wrote. For this reason, he added, Netflix isn’t a good stock to sell short or own.

Tilson had bet against Netflix by selling short, or borrowing and selling shares, and buying put options, which increase in value when a stock drops. Netflix traded at about $230 a share when he covered and peaked at $304.79 in July. The stock closed at $130.03 yesterday after its four-day plunge, the steepest since 2004.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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