Netflix issued a new “rights plan” that protects the company’s board of directors from outside investors buying up a huge stake in the company and demanding influence that isn’t in the best interest of Netflix.
The move is undoubtedly in response to billionaire financier Carl Icahn’s recent purchase of about a 10 percent stake in the streaming video giant.
Icahn didn’t directly state his motives for the purchase, but did indicated that he thought Netflix stock was under valued, and could be very valuable to larger companies who may want to acquire it. As a result, Netflix stock got a huge bump on the stock market.
Here’s the official statement from Netflix about the purpose of its new Rights plan:
“The Rights 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, and to enable all stockholders to realize the long-term value of their investment in Netflix. 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.”
Essentially, Netflix’s board wants to make sure Icahn isn’t able to assume control over the board of directors by purchasing a bigger stake of the company. At the same time, it does look like Netflix wants to reassure shareholders that the move isn’t intended to block any future attempt at outside companies who may want to acquire Netflix, especially after rumors that Microsoft was buying Netflix caused the stock price to jump last month.
A more detailed explanation of the Rights plan will be included in a future SEC filing, according to the company.
Original photo via BenLucier/Flickr