Is Icahn Done With Netflix?

As of 1 p.m. Eastern Standard Time on Wednesday, shares of the online-video streaming service Netflix (NASDAQ:NFLX) were trading at $97.77, approximately four percent below the previous day’s closing price. The drop in the company’s stock resulted from renewed industry speculation that activist investor Carl Icahn may sell his stake in Netflix to focus on his new interest, Transocean (NYSE:RIG).

In October, a 13D filing with the Securities and Exchange Commission showed that Icahn had increased his stake in Netflix to 9.98 percent, and subsequently he launched a vocal campaign for the company to sell itself. As Fortune noted in a piece published earlier this month, Icahn has “a history of targeting undervalued companies at bargain basement prices, and then arm twisting or using proxy battles to fight his way onto their boards and turn them around through restructurings or sales.” However, Netflix’s Chief Executive Officer Reed Hastings had no interest in selling and, together with the company’s other board members, adopted a poison pill plan to prevent Icahn from purchasing more shares.

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Now, its seems that Icahn may have less interest in forcing the sale of Netflix as well. Since October the company has made content deals with The Walt Disney Company (NYSE:DIS) and Time Warner (NYSE:TWX) to increase its library, and its stock is trading much higher than October’s $56 per share price. Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Comcast (NASDAQ:CMCSA) were suggested as possible acquirers of Netflix, but most appear to be unlikely matches. Amazon, Netflix’s main competitor, has significant content licenses, a strong infrastructure, an established subscriber base, and, like Apple, has little need for a video-streaming acquisition..

With these negative acquisition drivers at play, Icahn may even dump his shares. “Icahn has proven he can juggle but given the quick rise in NFLX and the apparent launch of a new project, we’re curious whether Icahn might merely be renting his shares in the DVD rental specialist,” wrote DealReporter in a recent analysis seen by StreetInsider.

But Icahn’s stance may be affected by the company’s next earnings report. While Netflix’s stock has made significant gains since October, the company’s fourth quarter earnings, scheduled for release on January 23, could change investor sentiment and send its stock price back down if the company’s reported subscriber growth does not appear to justify the expenditures the company made on content.

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