Netflix Returns Icahn’s Love With Poison Pill
Netflix (NASDAQ:NFLX) shares zoomed up last week on the day investor Carl Icahn announced he’d taken an almost 10 percent stake in the subscription video service, but the company is now resisting his overtures.
Netflix said on Monday that its board of directors had adopted a shareholder rights plan, also known as “poison pill,” that makes it harder for investors to acquire stakes in the company that cross certain thresholds. The plan is “intended to protect Netflix and its stockholders from efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders,” the company said.
Icahn said on October 31 that he had acquired stock and options totaling 5.54 million Netflix shares. The investor spent $168.9 million to buy 1.25 million shares and 4.29 million options expiring in September 2014, according to his filing with the U.S. Securities and Exchange Commission. Icahn said the reason behind his large investment was that Netflix was undervalued based on its market position and prospects as well as the possibility that it will be taken over by a larger company such as Google (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN) or Verizon (NYSE:VZ) soon.
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The shareholder plan will be triggered if an “activist shareholder” acquired 10 percent of the stock, or an institutional investor bought 20 percent, Netflix spokesman Jonathan Friedland told Bloomberg. It will expire in three years unless Netflix votes to extend it, Friedland added.
Netflix shares are up 11 percent this year, but have been erratic in the longer term, dropping from a peak of $298.73 in July 2011 to $53.80 in September.
Icahn unsuccessfully tried to get into a controlling position at Lions Gate Entertainment (NYSE:LGF) last year.
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