Netflix Inc. has adopted an antitakeover plan known to investors as the "poison pill" plan in an attempt to block investor Carl Icahn from expanding his 10 percent stake in the company.
Under the poison pill plan, Netflix shareholders will be allowed to obtain more stock if a person or group tries to purchase more than 10 percent in the company. The plan doubles the number of Netflix shares according to The Wall-Street Journal while also making it more expensive for people like Icahn to buy a bigger stake in the company.
"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," said a Netflix spokesman.
The web video-rental site approved the plan on Nov. 2, and it was used a great deal during the 1980s when billionaires made a portion of their profits through hostile takeovers. The move was seen as a necessary one by the company, as Netflix has lost a staggering 75 percent of its value in less than 16 months according to CNet.
Click here to see the statement released by Netflix about the plan.
Icahn has responded to the statement made by Netflix as well, criticizing the company for choosing the poison pill plan.
"This morning the Issuer announced its adoption of a poison pill. The Reporting Persons believe any poison pill without a shareholder vote is an example of poor corporate governance, and find the pill Netflix just adopted is particularly troubling due to its remarkably low and discriminatory 10% threshold," said Icahn in his press statement. "We also note that Netflix is one of the few companies that continues to ignore the fact that the shareholders have strongly expressed their wishes through a majority vote to de-stagger its board. As one of the company's largest shareholders we are concerned about the poor corporate governance at Netflix that these and other actions reflect."
Icahn is famous for convincing former Blockbuster CEO John Antioco into quitting despite the fact that the company was on the verge of making a comeback. Icahn then supported Antico's replacement Jim Keys, who then allowed Blockbuster to go bankrupt just two years ago.
Experts believe that Icahn was planning on purchasing a larger stake in the company to shake up management and then eventually force the company to sell or go bankrupt just like he did with Blockbuster.
Netflix is currently trading on the market at $78, which is up since last week when Icahn announced he was going to purchase a stake in Netflix.
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