Netflix’s Gain Is Carl Icahn’s Loss

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Carl Icahn, Herbalife, Netflix

Netflix’s (NASDAQ:NFLX) turn to original content has pleased subscribers, critics, and investors alike, except for investor Carl Icahn, who has been left at the losing end of a bet thanks to the Internet subscription streaming service’s gains on the stock chart.

Nearly one in four American households are paying subscribers of Netflix. Interest in the company’s originally-produced content like House of Cards and Orange is the New Black contributed to the greatest growth in subscribers in three years, customer additions that pushed fourth-quarter profit to $48.4 million, or 79 cents per share, a massive increase from the $7.9 million, or 13 cents per share, earned in the year-ago quarter. On the basis of Netflix’s growing strength, investors bid shares up 312.15 percent in 2013 — the best gains of any stock in the Standard & Poor’s 500 Index last year — and advanced the stock 16.44 percent since earnings were released after the markets closed January 22. Shares closed at a record $388.72 the following day.

Activist investor Carl Icahn, a man known for taking large stakes in companies he judges to be ill-managed or undervalued and then pushing for change, began amassing a nearly 10 percent stake in Netflix nearly eighteen months ago, when shares sold for around $58. At the time, the streaming subscription service was feeling the pressure of Amazon’s competing product and the weight of growing content acquisitions costs. Icahn’s solution was the sale of the company to a cash-rich Google (NASDAQ:GOOG) or Amazon (NASDAQ:AMZN), an opinion that laid the framework for a fight over the future of Netflix between the investor and Chief Executive Reed Hastings.

When the company drafted a “poison pill” shareholder rights plan, Icahn told the Wall Street Journal that, “I guess they decided to go to battle.” For it was his argument that, “at the right premium, somebody should buy Netflix,” as he told the publication. “They’ve got a great platform. That is also why it is such a great acquisition candidate for someone. Most of the shareholders would like to see the company sold at a big premium,” he added.

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