Icahn finds Netflix 'poison pill' tough to swallow

Investor calls it 'an example of poor corporate governance'
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Billionaire investor Carl Icahn is less than pleased with a Netflix (Nasdaq: NFLX) anti-takeover plan enacted, primarily, to block him from buying more than the 10 percent of the company he already owns.

The so-called "poison pill," which was approved by the seven-member board Nov. 2 and will be in effect for three years, says Netflix's shareholders can acquire more stock if any single investor buys more than 10 percent of the company. Such purchase would effectively dilute the value of the stock and make it more expensive for an investor like Icahn to grab a controlling stake.

For Icahn, though, the poison pill is a tough-to-swallow "example of poor corporate governance," said a Wall Street Journal story that examined a securities filing. According to the story, Icahn also said Netflix should allow all its directors to stand for election annually rather than continuing with a staggered system where only a portion of the board is up for election in any given year. According to the newspaper, Icahn, who acquired 9.98 percent of the company Oct. 31, did not return calls seeking further comment.

Netflix, on the other hand, was happy to comment.

"Adopting a rights plan is a very reasonable thing to do in light of the recent, and stealth, accumulation of stock and options by an activist investor," a Netflix spokesman told the newspaper.

Netflix board members also weren't available for comment, but the spokesman filled in the gaps by noting that the board "continuously reviews our governance structure" with the goal of maximizing "long-term value for shareholders."

Icahn, in buying into the mail order DVD/streaming video company, said he believed the shares were "undervalued" and that he might seek buyers for the company. His presence, if not necessarily welcomed by the company's board, was welcomed by investors, who sent the rollercoaster stock back up last week.

"If Icahn has a great deal of support from other shareholders, he may press ahead for policy changes or board members of his choosing," Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, told the Journal. "It becomes a game of chicken."

Icahn isn't the only threat Netflix faces, although it might be the only discernible internal threat. Amazon.com (Nasdaq: AMZN) has been trying to close the gap with more content and a more valuable retail connection, and Hulu and HBO Go both continue to lurk on the periphery.

Icahn, at least by his earliest comments, is not expected to sit by quietly and watch his money grow or wither.

"We have something to say and I would say this is going to play itself out pretty well," he promised when news first came out that he'd bought the stake.

For more:
- the Wall Street Journal has this story

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