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(Daily Finance)   Netflix creates poison pill to fend off Icahn takeover, boosts alchemy two levels   (dailyfinance.com) divider line 44
    More: Interesting, Carl Icahn, Motley Fool, activist investors, acquirers, digital TVs, poison pill, Netflix  
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4601 clicks; posted to Business » on 05 Nov 2012 at 2:17 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-11-05 01:22:47 PM
For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?
 
2012-11-05 02:22:21 PM

Endive Wombat: For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?


Essentially, if one person tries to gain a significant percentage of the company by buying up outstanding shares, they'll flood the market with so much new discounted stock that his large percentage will instantly vanish.
 
2012-11-05 02:24:58 PM

Vegan Meat Popsicle: Endive Wombat: For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?

Essentially, if one person tries to gain a significant percentage of the company by buying up outstanding shares, they'll flood the market with so much new discounted stock that his large percentage will instantly vanish.


Wouldn't that also devalue the stock for every other investor out there as well?
 
2012-11-05 02:28:25 PM
Also, in this case, it would be good for smaller investors because it would let you buy lots of shares in the company at a discount for what is essentially an instant profit. That's the key in making the pill work. It makes the stock very attractive to everyone but the takeover bidder.
 
jvl
2012-11-05 02:36:25 PM

RexTalionis: Wouldn't that also devalue the stock for every other investor out there as well?


Hence the name "poison pill"

If Icahn wants to throw away his investment in a fit of revenge, he can acquire more stock and active the pill and screw over a bunch of people who had nothing to do with adopting the poison pill. But rich people don't get rich by throwing away money on revenge.
 
2012-11-05 02:40:25 PM

RexTalionis: Wouldn't that also devalue the stock for every other investor out there as well?


Not necessarily. The trick is that current investors get to buy stocks at a discount which not only screws Icahen, but it can help absorb a good chunk of that devaluation. Icahn is the only one in this scenario guaranteed to get screwed. However, yes, anybody else currently holding stock might take it in the ass with him.
 
2012-11-05 02:40:57 PM
moviesmedia.ign.com

/hot like the fire, so delightful
 
2012-11-05 02:41:59 PM
Netflix is smart for doing this. You don't want Ichan taking anything over.
Just ask the fine folks who work for TWA.
 
2012-11-05 02:45:44 PM

jvl: RexTalionis: Wouldn't that also devalue the stock for every other investor out there as well?

Hence the name "poison pill"


I guess "f*ck you clause" doesn't sound as catchy.
 
2012-11-05 02:46:07 PM

Vegan Meat Popsicle: RexTalionis: Wouldn't that also devalue the stock for every other investor out there as well?

Not necessarily. The trick is that current investors get to buy stocks at a discount which not only screws Icahen, but it can help absorb a good chunk of that devaluation. Icahn is the only one in this scenario guaranteed to get screwed. However, yes, anybody else currently holding stock might take it in the ass with him.


So, it only screws over the people who might hold onto stocks for the long term in their personal portfolios or IRAs or 401Ks, rather than the active traders who make a living analyzing stock.
 
2012-11-05 02:52:08 PM

Endive Wombat: For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?


Arrested Development is cancelled.
--or--
More "New Releases"
 
2012-11-05 02:56:06 PM

RexTalionis: Vegan Meat Popsicle: RexTalionis: Wouldn't that also devalue the stock for every other investor out there as well?

Not necessarily. The trick is that current investors get to buy stocks at a discount which not only screws Icahen, but it can help absorb a good chunk of that devaluation. Icahn is the only one in this scenario guaranteed to get screwed. However, yes, anybody else currently holding stock might take it in the ass with him.

So, it only screws over the people who might hold onto stocks for the long term in their personal portfolios or IRAs or 401Ks, rather than the active traders who make a living analyzing stock.


Short term. Assuming the new "Netflix, an Amazon company, built by Oracle, powered by Intel (brought to you by Carl's Jr)" survives such a deal, wouldn't the Free Market (blessings upon 't) shower the new division of a huge company with unparalleled growth?
 
2012-11-05 03:00:56 PM
I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?
 
2012-11-05 03:06:57 PM

Virtual Pariah: I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?


He built the finest stadium currently existing in NYC.
 
2012-11-05 03:08:57 PM
They spend money getting decent movies for thier streaming service, I have watched all 10 decent movies they have.
 
2012-11-05 03:08:58 PM

Moopy Mac: Virtual Pariah: I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?

He built the finest stadium currently existing in NYC.


The one on Randall Island? I've only ever seen the signs for it.
 
2012-11-05 03:10:49 PM

buzzcut73: Netflix is smart for doing this. You don't want Ichan taking anything over.
Just ask the fine folks who work for TWA.


Or Blockbuster.
 
2012-11-05 03:11:16 PM

Virtual Pariah: I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?


I'm not familiar with all his shenanigans, but some of it appears to be people shocked that, just because he buys shares in companies, he thinks he can tell them what to do.
 
2012-11-05 03:19:18 PM

RexTalionis: Vegan Meat Popsicle: Endive Wombat: For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?

Essentially, if one person tries to gain a significant percentage of the company by buying up outstanding shares, they'll flood the market with so much new discounted stock that his large percentage will instantly vanish.

Wouldn't that also devalue the stock for every other investor out there as well?


Yes but the new stock is at half price.
 
2012-11-05 03:23:04 PM

Arkanaut: Virtual Pariah: I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?

I'm not familiar with all his shenanigans, but some of it appears to be people shocked that, just because he buys shares in companies, he thinks he can tell them what to do.


Understood. But is he interested in the long-term health of the company or the short-term return to the investors?
 
2012-11-05 03:24:43 PM

Bullseyed: Yes but the new stock is at half price.


So in what respect can this be described as Netflix doing what is best for its stockholders?
 
2012-11-05 03:34:23 PM

Virtual Pariah: Arkanaut: Virtual Pariah: I don't know the specifics of Icahn's history, but people seem to think he's bad news.

Before I start looking for a wiki, can some one sum up his deal w/o any bias?

I'm not familiar with all his shenanigans, but some of it appears to be people shocked that, just because he buys shares in companies, he thinks he can tell them what to do.

Understood. But is he interested in the long-term health of the company or the short-term return to the investors?


Think very very very short term. Icahn is a corporate raider, like T. Boone Pickens. Folks like them operate two ways, either they see a company that they think would be a good target for a larger company (that they usally also sit on the board of) and swoop in, buy up enough shares to gain a controlling interest in the smaller company, then force a sale to the larger company at a huge personal profit.
OR they see a company that has a particular unit or product that they'd like to have in one of their existing companies and they swoop it, buy up a controlling interest, then liquidate the smaller company, keeping the choice part for themselves at rock-bottom price via the liquidation and everybody else in the smaller company is SOL.
 
2012-11-05 03:34:44 PM
Wow...in before most of the haters.

/happy with my $16/mo
 
2012-11-05 03:40:51 PM

Chagrin: Bullseyed: Yes but the new stock is at half price.

So in what respect can this be described as Netflix doing what is best for its stockholders?


Define "best". If it's short-term profit you're after, and then on to the next new thing, then Icahn is the best news you've had all day. There are "Icahn-groupies" out there who do nothing more than watch where he puts his money, and then follow suit.

If, OTOH, you think Netflix will be worth much more as a bigger company in the future, you may be willing to accept a short-term poison pill to get an even better deal down the road.
 
2012-11-05 03:55:07 PM
This is the same dipsh*t who took over Blockbuster (and proceeded to get steamrolled by Netflix).
 
2012-11-05 04:27:41 PM

RexTalionis: So, it only screws over the people who might hold onto stocks for the long term in their personal portfolios or IRAs or 401Ks, rather than the active traders who make a living analyzing stock.


Possibly, if Icahn pushed the issue despite the poison pill, but why would he do that? The whole point is that it makes it an almost certain losing proposition for him. If he buys the 10% to trigger the pill he loses his 10% stake virtually immediately which defeats the entire purpose of buying in to begin with.

Whether this is good for current investors or not is really more about whether you think the current board's strategy is the best way forward or Icahn's is. The pill's not going to be triggered either way because Icahn isn't going to trigger it and lose a time of money just out of spite so what it really comes down to as an investor is whether or not you think the pill should even exist, not what might happen if it were triggered. 

Even at that, though, it's possible that in the long term it could still pay off even if there is a sudden, precipitous drop in value. It's entirely possible whatever the new shareholders chose to do could ultimately make a profit for the current shareholders.
 
2012-11-05 04:35:30 PM

Chagrin: Bullseyed: Yes but the new stock is at half price.

So in what respect can this be described as Netflix doing what is best for its stockholders?


It can't.

The Poison Pill is only helpful to the upper management of the company.
 
2012-11-05 05:44:26 PM

Virtual Pariah: Understood. But is he interested in the long-term health of the company or the short-term return to the investors?


As the former CEO of Blockbuster put it after he left the company when Icahn took an interest:

When directors with preconceived notions are determined to serve as obstacles to management's plans, it's hard to find a formula for success
 
2012-11-05 05:44:29 PM
So basically, Icahn 'Bain Capitalizes' companies by selling off anything of value and leaving the dessicated husk of the former company to rot in penny stock hell. Got it.
 
jvl
2012-11-05 05:57:04 PM

germ78: So basically, Icahn 'Bain Capitalizes' companies by selling off anything of value and leaving the dessicated husk of the former company to rot in penny stock hell. Got it.


If the company is worth more torn up and sold that it is as an ongoing concern, then it's a good thing to tear it up and destroy it.

For example, Blockbuster selling all it's stores and moving to mail order and online instead would have been a good destruction of an enterprise while retaining stockholder value. Customers would be better served for less money, and the buildings could house useful enterprises.

But that's not what Icahn did; Netflix's shareholders are better served by Reed who did see that coming.

(Also regarding Bain, method two for people like that is to come into a good business and replace the moron at the top with someone who can turn the company around. The economy improves when sick cows are healed or turned into meat. No one wins if the cow stays sick. Don't blame the guys who goes around buying sick cows when some of them become your next Happy Meal.).
 
2012-11-05 06:46:04 PM

jvl: If the company is worth more torn up and sold that it is as an ongoing concern, then it's a good thing to tear it up and destroy it.


Unless by "good" you mean what's good for the customers and employees.
 
jvl
2012-11-05 06:58:39 PM

MrEricSir: jvl: If the company is worth more torn up and sold that it is as an ongoing concern, then it's a good thing to tear it up and destroy it.

Unless by "good" you mean what's good for the customers and employees.


Yes, that's exactly the good I mean. Note in my example I specifically called out the "good for customers."

It may not be good for those exact employees, but it is good for employees in general. It's easier to get a job when more people have jobs; also, wages rise as more people have jobs.

So imagine you own a Blockbuster franchise in the year 2002. You barely make a profit. You employ a dozen minimum-wage zombie teenagers. What is better, keeping them employed or selling the store for a quarter-million and then creating a real business with the money? When money shifts from stupid or obsolete businesses to new and thriving business, more people have jobs. Carriage makers lose their jobs when investment shifts to those newfangled horseless carriage things, but workers in general benefit.

Unless the business owner is a moron and thinks outsourcing is a good idea. That trick never works.
 
2012-11-05 07:08:59 PM

jvl: Note in my example I specifically called out the "good for customers."


Putting obstacles in the path of customers is never a good thing. If I'm used to shopping at Circuit City and one day they close, that's not good for me, period. It's even worse if I have an outstanding relationship with them (extended warranties and such.)

If a business truly can't compete that's one thing, but if a bunch of know-it-alls take over the boardroom because they have this magic plan to save the business by destroying it, that's not good for anyone.
 
2012-11-05 07:53:14 PM

sophus_tree: [moviesmedia.ign.com image 480x271]

/hot like the fire, so delightful


Thank you, this was the first image in my mind.
 
2012-11-05 08:10:54 PM

Komplex: Chagrin: Bullseyed: Yes but the new stock is at half price.

So in what respect can this be described as Netflix doing what is best for its stockholders?

It can't.

The Poison Pill is only helpful to the upper management of the company.


Stability is good for the shareholder.
 
2012-11-05 08:26:36 PM

jvl: germ78: So basically, Icahn 'Bain Capitalizes' companies by selling off anything of value and leaving the dessicated husk of the former company to rot in penny stock hell. Got it.

If the company is worth more torn up and sold that it is as an ongoing concern, then it's a good thing to tear it up and destroy it.


For example, Blockbuster selling all it's stores and moving to mail order and online instead would have been a good destruction of an enterprise while retaining stockholder value. Customers would be better served for less money, and the buildings could house useful enterprises.

But that's not what Icahn did; Netflix's shareholders are better served by Reed who did see that coming.

(Also regarding Bain, method two for people like that is to come into a good business and replace the moron at the top with someone who can turn the company around. The economy improves when sick cows are healed or turned into meat. No one wins if the cow stays sick. Don't blame the guys who goes around buying sick cows when some of them become your next Happy Meal.).


Only if the only thing you care about is money. There is more to a company than monetary value to most people, Icahn excluded.
 
2012-11-05 10:22:27 PM

jvl: germ78: So basically, Icahn 'Bain Capitalizes' companies by selling off anything of value and leaving the dessicated husk of the former company to rot in penny stock hell. Got it.

If the company is worth more torn up and sold that it is as an ongoing concern, then it's a good thing to tear it up and destroy it.

For example, Blockbuster selling all it's stores and moving to mail order and online instead would have been a good destruction of an enterprise while retaining stockholder value. Customers would be better served for less money, and the buildings could house useful enterprises.

But that's not what Icahn did; Netflix's shareholders are better served by Reed who did see that coming.

(Also regarding Bain, method two for people like that is to come into a good business and replace the moron at the top with someone who can turn the company around. The economy improves when sick cows are healed or turned into meat. No one wins if the cow stays sick. Don't blame the guys who goes around buying sick cows when some of them become your next Happy Meal.).


Long-term or short-term?

These two things are not necessarily compatible. Liquidating a company may make a handful of people a lot of money today, but keeping that company running may make many more people a moderate amount of money for decades.

Liquidating also always ends up eliminating jobs. You never hire more people to do less work, especially not at anything even close to prior wages.

Vulture Capitalism is a plague on the economy.
 
2012-11-05 10:40:31 PM
I think my favorite Ichan defining moment is how he handled TWA. First, he sold all of the (very profitable) London routes along with a bunch others to a competitor, raids the pension funds, and sells owned aircraft to leasing companies and leases them back. Then, when TWA started swirling the drain because of that, he demanded his investment back, took the company to bankruptcy, and settled it by demanding they sell tickets to Karabu (a holding company of Ichan's) for 55 cents on the dollar on the agreement that they wouldn't be available to travel agencies.
He then turns around and sells those tickets on a website (lowestfares.com) because technically a website is not a travel agent, which pretty much put TWA in the toilet for good.

TL;DR version...Ichan is a vulture, and always has been.
 
2012-11-06 12:31:33 AM

Gunny Walker: Endive Wombat: For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?

Arrested Development is cancelled.
--or--
More "New Releases"


All this time I have waited for Seaward 2: Clap Trap Boogaloo and the idiots at Netflix are going to snatch it away.
 
2012-11-06 01:22:21 AM
I learned in my 3000 finance class that a company with a poison pill isn't that good an idea to invest in anyway.
 
2012-11-06 02:54:52 AM
pag1107: keeping the choice part for themselves at rock-bottom price via the liquidation and everybody else in the smaller company is SOL.

In short

You will be assimilated, We will add your biological and technological distinctives to our own. You will adapt to service us. Resistance is futile.
 
2012-11-06 11:33:24 AM

Endive Wombat

For those of us who find math to be hard, WTF does this mean and does it actually matter to the common, low-level investor?
It means that it's idiotic that your vote counts as much as an educated person's vote.
 
2012-11-06 03:28:47 PM
They could force Icann to watch Gallery Girls.
 
2012-11-07 04:39:03 PM
This is the problem with publicly owned companies. I'd much prefer a system where all stock prices were fixed at IPO prices and ROI depended on steady dividends. And you'd get lump sum dividends every three years to make corporate looters at least wait a little while before tearing up the place.
 
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