Netflix moves to block Icahn

Netflix has moved to thwart Carl Icahn’s efforts to build a stake in the DVD and video streaming service after its board approved a “poison pill” shareholder rights plan that would flood the market with shares if the activist investor increases his holding above 10 per cent.

The company said the plan was designed to protect it from “efforts to obtain control of Netflix that the board determines are not in the best interests of Netflix and its stockholders”.

Mr Icahn revealed last week that he had accumulated a stake of about 10 per cent in the company, which has endured a turbulent 18 months. A botched rebranding and price hike have been followed by several sharp declines in the shares.

He responded to the Netflix rights plan in a regulatory filing, saying “any poison pill without a shareholder vote is an example of poor corporate governance”. The Netflix poison pill was “particularly troubling due to its remarkably low and discriminatory 10 per cent threshold,” the filing added.

Mr Icahn took another swipe at Netflix, which has a “staggered” board, with three directors up for re-election at its annual shareholder meeting. Mr Icahn said Netflix continued “to ignore the fact that the shareholders have strongly expressed their wishes through a majority vote to de-stagger its board.”

Mr Icahn, who has previously expressed admiration for Reed Hastings, Netflix’s chief executive, has experience of the DVD and home entertainment industry, having bought a stake in Blockbuster in 2005.

He agitated for changes on the Blockbuster board but was unable to prevent it filing for bankruptcy in 2008, as customers abandoned the chain for subscription services such as Netflix.

Netflix shares have risen sharply since Mr Icahn revealed he had built a stake in the group. Shares in the group rose 0.9 per cent on Monday afternoon to $77.84, but they remain far off the peak of $300, which they touched last year before the group’s botched rebranding.

The company has sought to rebuild investor confidence since the rebranding but has not fared well, missing a target for US subscribers to its streaming service at its most recent quarterly earnings.