Reed Hastings has a new bedfellow who tends to make media mavens nervous. Corporate raider Carl Icahn disclosed Wednesday that he holds nearly 10% of Netflix, which Hastings founded and runs, and may push for a sale or merger.
The news buoyed Netflix’s volatile shares, which surged by 20% in midday trading. They settled up 14% at $79.24, a standout in an overall soft market.
A Securities and Exchange Commission filing Wednesday revealed that Icahn snapped up 5.5 million shares — or 9.98% — of Netflix in a series of transactions between Sept. 4 and Oct. 25. He thinks the stock is undervalued and the company “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,” according to the SEC filing.
Icahn is “considering ways for the issuer to maximize shareholder value but reached no conclusion” and “may in the future seek to have discussions” with Netflix, the filing added.
For decades, Icahn has been buying into companies he considers undervalued and poorly managed and pressures execs to change course or sell. He’s had mixed results in the showbiz space, with high-profile runs at Time Warner, Blockbuster and most recently, Lionsgate.
But Netflix seems an ideal target. The stock traded at close to $300 in the summer of 2011 but has been driven down by strategic missteps that alienated customers as well as competition from video-on-demand, Hulu, Amazon and others. It still has a strong following on Wall Street, but took another big hit last week when it fell short of its own predictions for new subscribers in the third quarter.
But takeover chatter with Microsoft, Comcast and Apple rumored to be possible buyers routinely pumps up the stock. Icahn’s appearance will add fuel to the speculation.