April 18, 2024

DealBook: Icahn Takes Stake and Netflix Shares Surge


We have seen this movie before, though the ending this time is unclear.

The billionaire investor Carl Icahn announced late Wednesday that his hedge fund, Icahn Capital, had acquired a roughly 10 percent stake in Netflix. The news caused shares of the media company to soar as much as 22 percent. Toward the close, the stock was up 14.4 percent, at $79.60.

In a filing with the Securities and Exchange Commission, Mr. Icahn said that he thought Netflix was undervalued and suggested that it could make a strong acquisition candidate for a larger entertainment company.

“The reporting persons acquired the shares with the belief that the shares were undervalued due to the issuer’s dominant market position and international growth prospects,” said the filing. “The reporting persons believe Netflix may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the internet, mobile, and traditional industry.”

The filing by Mr. Icahn is the latest in a string of activist positions taken by the 76-year-old investor. His playbook consists of accumulating a large stake in a company and then agitating for change.

Mr. Icahn has recently had a mixed track record with his large activist positions. He won seats on the board of Blockbuster, only to see the movie-rental chain end up in bankruptcy in 2010. A more successful investment was in ImClone, accumulating stock in the low $40s, taking over as the biotechnology company’s chairman, and then selling it to Eli Lilly for $70 a share in 2008.

More recently, last year Mr. Icahn failed in his bid to force a sale of the consumer products giant Clorox. After he put the company in play with a $10 billion bid, Mr. Icahn acknowledged that he lacked the support of Clorox shareholders to get any deal done.

Mr. Icahn hopes to have better luck with Netflix, the Los Gatos, Calif.-based company started by the entrepreneur Reed Hastings. Netflix’s stock, before Wednesday’s news, had dropped about 75 percent from its 2011 peak. Even though the company recently reached a milestone, streaming video service into 25 million homes in the United States, investors have sold Netflix shares as its growth has slowed in recent quarters.

Article source: http://dealbook.nytimes.com/2012/10/31/icahn-takes-stake-and-netflix-shares-surge/?partner=rss&emc=rss