Netflix moves to block a hostile takeover

• Carl Icahn disclosed last week he owns almost 10% of the stock
• Poison pill would flood the market with additional shares
• Netflix has been struggling since it raised prices last year

NEW YORK (AP) — Netflix is moving to protect itself against hostile takeovers, less than a week after investor Carl Icahn disclosed a stake of nearly 10% in the online video company.

Netflix (NFLX) said Monday that it has adopted a shareholder rights plan, also known as a poison pill. Such a plan is designed to make it difficult or impossible for someone to take over the company without an agreement from the board. When the provision is triggered, additional shares of the company's stock flood the market and make it prohibitively expensive for a takeover.

Netflix said the provision is triggered if a person or group acquires 10% of Netflix, or 20% in the case of institutional investors, in a deal not approved by the board. The Los Gatos, Calif.-company said its plan isn't intended to interfere with a board-approved transaction.

"Adopting a rights plan is a very reasonable thing to do in light of the recent accumulation of a lot of Netflix stock by an activist shareholder," spokesman Jonathan Friedland said.

Icahn disclosed last Wednesday that he spent some of his $14 billion fortune on his 10% stake. The documents he filed didn't disclose why Icahn and his investment funds have been buying 5.5 million Netflix shares since early September. But it's likely that he would press Netflix to make dramatic changes to boost its stock price.

The company has been stumbling since it raised prices in the U.S. as much as 60% last year. That triggered a backlash that resulted in the loss of hundreds of thousands customers and raised concerns on Wall Street that CEO Reed Hastings would have trouble paying for an ambitious plan to expand the company's service into dozens of other countries.

There is some cause for worry. Netflix's earnings through the first nine months this year have fallen 95% from last year. The company also issued a fourth-quarter forecast that indicated the company might end up with a loss for the full year. This would be Netflix's first annual loss in a decade.

The rights plan expires Nov. 2, 2015. In a regulatory filing Monday, Icahn called the adoption of a poison pill without a shareholder vote "an example of poor corporate governance."

The stock is trading toward the lower end of its 52-week range of $52.81 to $133.43. It peaked at close to $305 nearly 16 months ago.