Market Overview

Netflix Shares Rally Big After Carl Icahn Discloses Stake

Shares of Netflix (NASDAQ: NFLX) shot through the roof late in the afternoon on Wednesday, after famed hedge fund manager Carl Icahn disclosed a 9.98 percent stake. Shares rallied over 20 percent, and were halted twice on circuit breaker.

With Icahn now in the name, shareholders could soon seen a massive return on their investment. In recent weeks, the possibility of Netflix as a takeover target has floated around. In fact, last Friday, shares of Netflix gained over 13 percent on speculation that Microsoft (NASDAQ: MSFT) would be in the market for the streaming video provider.

In Icahn's filing, he notes that shares are -- in his opinion -- undervalued, and that the market is not fully factoring in Netflix's dominant position and international growth prospects. Icahn also said that Netflix could hold strategic value for a larger company.

Icahn's filing reveals that he may seek to have talks with Netflix management.

As an activist investor, Icahn has made his name by shaking up companies to create value. This has included changing management, shifting strategic direction, or selling assets. In the case of Netflix, Icahn may be seeking to force a sale.

If the rumors are true, Microsoft would be the obvious partner. Netflix's streaming offerings would boost the value of the Xbox as an entertainment brand, something Microsoft has worked hard to foster in recent years.

Of course, other companies might be interested as well. Perhaps Apple (NASDAQ: AAPL) would like to add Netflix's assets to its portfolio to make Apple TV more appealing? Google (NASDAQ: GOOG) could use Netflix in a similar way, merging it with Android and the GooglePlay market.

At any rate, it has been a bumpy ride for long-term holders of Netflix. Shares plummeted from near $300 in the summer of 2011 to near $50 earlier this year. However, with Icahn now involved, shareholders might finally find some relief.

Posted-In: News Hedge Funds M&A Intraday Update Movers Tech Trading Ideas General Best of Benzinga

 

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