Netflix Adopts Shareholder Rights Plan After News of Carl Icahn Investment
UPDATED: Stockholder rights plans, also known as "poison pills," make hostile takeover attempts too expensive.
Netflix said Monday that its board of directors has adopted a stockholder rights plan following last week's news that dissident shareholder Carl Icahn has acquired a 10 percent stake in the online video streaming firm.
Stockholder rights plans, also known as "poison pills," make hostile takeover attempts too expensive for suitors by increasing the number of shares and'or making them more expensive.
The plan is "intended to protect Netflix and its stockholders from efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders," the company said.
Netflix also said that the plan should "enable all stockholders to realize the long-term value of their investment in Netflix." It added: "The Rights Plan is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the board of directors."
Icahn has signaled that he could acquire more stock in the online streaming company and push for a sale of Netflix. He has often pursued similar strategies at other media and entertainment companies that he has targeted as being undervalued on the stock market.
Under the Netflix shareholder rights plan, each shareholder will get one right per share. Each right will entitle stockholders to buy one one-thousandth of a share of a new series of preferred stock at an exercise price of $350 per right. "The rights will be exercisable only if a person or group acquires 10 percent (or 20 percent in the case of institutional investors) or more of Netflix’s common stock in a transaction not approved by Netflix's board of directors," the company said. Each right also entitles its holder, other than the acquiring person or group, to purchase a number of shares of Netflix’s common stock "having a then-current market value of twice the exercise price," it said.
The rights will expire on Nov. 2, 2015, unless the company redeems them before that. The company could also extend the plan.
Netflix's stock was down 1 percent in early Monday trading.