Netflix Stock Climbs After Carl Icahn Takes a Position

 Billy Farrell/PatrickMcMullan.com/Sipa Press

Netflix shares soared 14 percent on Wednesday after billionaire financier Carl Icahn reported he had taken a 10 percent share in the beleaguered leader in subscription DVDs and streaming media.

Icahn, well known in Hollywood for acquiring beaten-down stock in media companies and then becoming an activist shareholder to one degree or another, said in a regulatory filing that Netflix is “undervalued” due in part to its “dominant market position and international growth prospects."

The filing says Icahn has purchased a 10 percent stake in the company by way of stock and options, and it indicates that Netflix could be an acquisition target for a larger company. At the close of trading on Wednesday, Netflix's market capitalization was $4.4billion, roughly $350 million more than Disney said it will pay to acquire Lucasfilm.

"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," Icahn said in the regulatory filing. 

Icahn also said he is considering ways "to maximize shareholder value" and that he "may in the future seek to have discussions" with Netflix.

Netflix shares, which rose as much as 20 percent in midday trading, closed $9.66 higher on Wednesday to $79.24. Even after Wednesday's big boost, the stock remains down more than 70 percent since last summer, when it breifly traded north of $300 per share. The stock has taken a significant hit as investors worry about the cost of licensing premium content for streaming and Netflix's seeming inability to raise subscription prices without losing a fair amount of customers.

With Icahn's purchases, his stake in Netflix is roughly twice that of CEO and co-founder Reed Hastings, according to public filings.

 

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