Following news that Bill Ackman's Pershing Square Capital had purchased more than 3.1 million shares of Netflix, the stock jumped sharply in after-hours trading on Wednesday.

He bought at a significant discount. Since its fourth-quarter results release last week, and amid a series of broad market selloffs linked to interest rate worries, the streamer's stock has plummeted. Investors were unimpressed by the company's Q4 subscriber growth and management guidance. Ackman described it as an "opportunity to acquire Netflix at an attractive valuation" in a letter to Pershing Square shareholders today. The stock finished down 1.8 percent but rose over 5% after hours.

“We have greatly admired Netflix both as consumers and as investors, but have never previously owned a stake in the company,” he said, calling the platform founded by Reed Hastings “a primary beneficiary of the growth in streaming and the decline in linear TV driven by its superior customer experience, a vast and diverse amount of superb, constantly refreshed content, global improvements in bandwidth, and the proliferation and continuous improvement and convenience of devices on which one can watch.”

Pershing bought the shares starting on Friday and throughout the last few days, he claimed.

In his letter, he explained why he like Netflix:

-“Subscription-based, highly recurring revenues, which have enormous future growth potential”

-“A truly best-in-class management team and unique high-performance culture”

-“Economies of scale and superb quality in its industry-leading content, which should continue to drive future growth and widen the company’s powerful competitive moat”

-“Pricing power derived from the enormous value it delivers to consumers compared with other alternatives”

-“Substantial margin expansion, with the opportunity for continued improvement due to economies of scale and the company’s rapidly growing, global subscriber base”

-“An improving free cash flow profile which should allow for continued investments in growth as well as the return of cash to shareholders”

According to him, Pershing, which is also an avid Universal Music Group investor, funded the stock purchases by unwinding a large portion of its interest rate hedge, yielding $1.25 billion in revenues.