Netflix Inc. (NFLX) recently announced that it is discontinuing with the “poison pill” provision, which had been set up late 2012 to prevent a takeover of the company. The poison pill was slated to expire three years after its formation.
The "poison pill" provision, which gives the shareholders right to takeover a company, has been terminated by Netflix in order to prevent any hostile bid from the likes of active shareholders such as Carl Icahn. Currently, Icahn holds approximately 4.5% of the Netflix stock.
Netflix is growing in a big way and management does not want others to take away a significant share of the profits. The stock has jumped a massive 275.6% over the last one-year. The strong growth has been driven by Netflix’s solid results due to significant growth in subscriber base over the last 12 months.
In order to maintain and extend the subscriber base, Netflix continues to enter into partnerships with major film studios and production houses, which include names such as DreamWorks Animation, The Wachowskis (creators of The Matrix trilogy) and J. Michael Straczynski (Babylon 5), Gaumont International, Sony (SNE) Pictures and The Weinstein Company.
Apart from this, Netflix has also entered into a partnership deal with Walt Disney’s (DIS) Marvel Entertainment. Per the deal, the company will roll out at least four new 13-episode series and a mini-series based on characters such as Daredevil, Jessica Jones, Iron Fist and Luke Cage which will be broadcast on Netflix beginning 2015.
These deals are important for the company and are expected to boost revenues much faster. We believe that improved optimism over its future results prompted Netflix to terminate the poison pill provision so early.
Moreover, these deals are expected to provide Netflix competitive advantage over peers that include HBO and Amazon (AMZN). Although increasing competition is a challenge for Netflix, new international expansion will help the company in the long run.
Netflix currently has a Zacks Rank #1 (Strong Buy).