Carl Icahn Exercises Netflix Options

Carl Icahn - New York Historical Society's History Makers Gala - 2010
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As expected, the billionaire financier's latest move officially gives him a 9.98 percent stake in the company.

Carl Icahn has exercised all of his Netflix call options, according to a regulatory filing Monday, officially bringing his stake in the company to 9.98 percent -- just shy of a 10 percent threshold that would trigger poison-pill provisions.

Icahn already had purchased 1.3 million shares for $58.40 apiece, but the rest of his stake had been in call options for 4.2 million shares, according to Monday’s filing. After exercising the options, he has amassed a total of 5.5 million shares at a cost of $323.6 million, though by midday trading Tuesday, his stake was worth $457 million.

Icahn first disclosed Oct. 31 that he was acquiring Netflix shares. The stock has surged 20 percent since then.

Icahn said the stock was undervalued when he purchased his shares and options, and the activist shareholder has suggested since then that Netflix would make a good acquisition target for a larger company. In midday trading Tuesday, the stock was up 2 percent to $83.09, giving Netflix, which streams premium content to 30 million subscribers worldwide, a market capitalization of $4.6 billion.

Netflix CEO Reed Hastings has suggested he’d rather not sell the company he co-founded, and the poison pill – or shareholders’ rights plan -- was adopted shortly after Icahn’s Halloween-day disclosure of his stake. The plan makes it much more difficult for an individual shareholder to acquire a 10 percent stake in Netflix and hold outsized sway over corporate strategy and such.

Icahn’s maneuverings and Netflix’s response have set the stage for a possible proxy battle at Netflix and other infighting among the company's largest shareholders.