Bill Ackman, the billionaire hedge fund manager, sold his shares in Netflix for a loss of approximately $400 million (£305 million), reversing his bullish stance on the streaming behemoth following its announcement of a more than 200,000 subscriber loss.

In January, the New York-based investor purchased more than $1 billion in Netflix stock, despite dire expectations for the company's subscription growth. According to Ackman, the following decline in the share price created an "attractive" opportunity for his Pershing Square fund.

However, Ackman reversed his position overnight after Netflix shares fell more than 35% in response to news that the company had lost more than 200,000 subscribers in the first three months of the year and was likely to lose another 2 million in the coming quarter as customers reviewed subscriptions purchased during the height of Covid lockdowns.

Netflix's market value was reduced by around $50 billion due to the share decline.

Ackman's decision to sell the position is estimated to have cost the Pershing fund $400 million. Ackman admitted in a letter to investors that the losses reduced returns by four percentage points.

"One of the lessons we've learned from previous blunders is to respond quickly when we uncover fresh information about an investment that contradicts our initial assumption. That is why we did what we did here," Ackman explained to investors.

"While we admire Netflix's management and the remarkable company they have built, given the enormous operating leverage inherent in the company's business model, changes in the company's future subscriber growth could have an outsized impact on our intrinsic value estimate," Ackman noted.

The hedge fund manager admitted that Netflix has a strategy to stem the bleeding, including a more aggressive approach to non-paying subscribers and the integration of advertising into its streaming service. However, he did add that implementation of the reforms could take at least one to two years.

"While we believe these business model changes are prudent, their impact on the company's long-term subscriber growth, future revenues, operating margins, and capital intensity is extremely difficult to predict," Ackman said.

According to Russ Mould, investment director at AJ Bell, the strategy entails "dramatic changes" in the streaming service. "It will be interesting to see how its largest shareholders view its chances of successfully executing them, or whether it is time to start over with new thinking and possibly new leadership."