Netflix takes poison pill to ward off Icahn takeover

Netflix Inc.

Last Updated at 26 Dec 2014, 16:00 ET Netflix Inc. twelve month chart
price change %
340.05 -
-2.05
-
-0.60

Related Stories

The board of film rental firm Netflix has adopted a "poison pill" strategy to ward off a potential hostile takeover bid by activist investor Carl Icahn.

The shareholder rights plan would flood the market with newly issued shares if anyone buys more than 10% of the firm.

Mr Icahn disclosed last Wednesday he had accumulated a 9.98% stake.

Netflix shares have lost three-quarters of their value since peaking in July 2011, after an up-to-60% jump in its prices led to a drop in subscribers.

An aborted plan by management to spin off its DVD-rentals-by-post business in order to focus on online streaming also backfired, as many customers balked at the resulting need for them to create two separate accounts.

Although the price rise generated a short-term rise in profits last summer, in the first nine months of this year profits fell by 95% from a year earlier as customers walked away, and as the company bore the cost of an aggressive international expansion.

The "poison pill" is a strategy commonly used by management of a listed company to protect themselves from investors they fear may oust them following a takeover, and Mr Icahn has been on the sharp end more than once before.

However, the 10% trigger threshold - tailoured for Mr Icahn - is unusually low.

Netflix's board has set a higher 20% threshold if the shareholder is a financial institution rather than an individual investor.

Mr Icahn called the management's move - which was not put to a shareholder vote - "an example of poor corporate governance", and criticised the fact that only a third of the company's board is up for election by shareholders each year.

The investor has said that he thinks Netflix is undervalued and would make an attractive acquisition for other companies. Microsoft and Amazon have been speculated as possible buyers.

Mr Icahn has not indicated whether he would seek to make changes in management or company policy - something he has done at other companies he has invested in.

Netflix's board said that the poison pill was "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".

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features & Analysis

  • Abdi Nor IftinGolden ticket

    How a refugee entered a lottery and won a new life in the US


  • Herring in a fur coatMerry herring

    How fish 'in a fur coat' is enough to make Russia's New Year happy


  • Curiosity Self-Portrait at 'Windjana' Drilling SiteIn pictures

    The most stunning space photos of the year


  • Amy Adams, Cate Blanchett, Sandra Bullock and Dame Judi DenchFilm quiz of 2014

    How much do you remember about the past 12 months?


Elsewhere on the BBC

  • GeoguessrWhere in the world...?

    Think you are a geography expert? Test your knowledge with BBC Travel’s interactive game

Programmes

  • Tom BrookTalking Movies Watch

    Tom Brook looks back at some of the best movies of 2014 from around the world

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.