Nov
05
2012
Activist shareholders have launched plans for a hostile takeover but on Monday Netflix stated that they had adopted a "stockholder rights plan" to prevent this from happening.
The investors have dubbed the plan the "poison pill" and will implement it should any group or individual attempt to purchase a mass of Netflix shares without board consent. In the event of this happening Netflix can make the takeover bid hugely expensive by flooding the market with new shares.
Only last week Carl Icahn (a notorious corporate raider) purchased ten percent of the firm and this rang major alarm bells at Netflix as he remarked that the firm would make a great lure for the major technological giant of the video world. Apple (AAPL, Fortune 500),Comcast (CMCSA),Microsoft (MSFT, Fortune 500),Google (GOOG, Fortune 500),Amazon (AMZN,Fortune 500 and Verizon (VZ, Fortune 500) all spring to the forefront.
Should any investor try to acquire more than ten percent of the Netflix shares then the poison pill will automatically kick in. Institutional investors such as Icahn will be affected by the plan at twenty percent. Currently Carl Icahn commands a 9.98% stake.
On Monday afternoon Icahn stated that using a "poison pill" with no shareholder agreement could only be described as poor collective command. Icahn felt that the ten percent threshold was discriminatory, troubled and low. Icahn felt that the shareholders were ruled by the Netflix board.
Netflix agree that they are a prize target for the bigger technological companies even in view of their poor quarterly earnings report. Netflix (NFLX) feel that takeover under those terms could be a way forward.
The bigger companies could offer muscle in conjunction with financial backing to assist Netflix to withstand the ever increasing prices of content.