Netflix, Inc. (NASDAQ:NFLX) subtly suggested that the leading video service's stock had gotten ahead of itself, and billionaire trader Carl Icahn took note. Shares of Netflix moved lower after an SEC filing showed that Icahn had trimmed his stake from 9.4% to 4.5%. Icahn, and his affiliated parties, had actually started to trim their stakes earlier this month, but the lion's share of the stock being sold was unloaded yesterday at $341.44 a share.
That's certainly not too shabby for a guy who had bought in back when Netflix was in the double digits, nearly a year earlier. He may be unloading more than half of his original stake, but it's important to note that he has nearly twice as much money riding on Netflix now, at 4.5% of the company, than he did late last year, with 9.4%. That's what happens when you have a stock more than quadruple, and you take some money off the table.
Icahn made out far better this time than he did several years ago when he figured that Netflix rival Blockbuster -- now owned by DISH Network Corp. (NASDAQ:DISH) -- was the smarter activist play.
After DISH Network picked up the remains of the once-dominant video rental chain, Icahn wrote in a Harvard Business Review article in 2011:
Blockbuster turned out to be the worst investment I ever made. It failed because of too much debt and changes in the industry. It had too many stores, Netflix created a better business model, and then Redbox kiosks and the whole digital phenomenon eliminated the need for consumers to go to a separate DVD store.
He got his wish a year later when he was able to buy into Netflix at a cost basis of just $58 a share.
Icahn even tweeted his partial exit, thanking Hastings, content chief Ted Sarandos, and even House of Cards star Kevin Spacey.
Sold block of NFLX today. Wish to thank Reed Hastings, Ted Sarandos, NFLX team, and last but not least Kevin Spacey: http://t.co/BRWpKOBfD2 -- Carl Icahn (@Carl_C_Icahn) October 22, 2013
Where does this leave investors?
Well, they may feel like blaming Hastings for being so darn honest about the volatile nature of his stock. He pointed to the stock's torrid run in 2003 -- similar to this year's surge -- before shedding more than half of its value a year later. Hastings argued that Netflix's growth has been reasonably steady, leaving the spikes and lulls of investor confidence to drive the stock higher and lower.