UPDATE: Icahn did NOT purchase shares at all - he mostly bought ITM Calls (he only purchased 500K shares, the rest of the disclosed 5.541MM stake is from call-option equivalents). It would appear someone is trying to make their year in one super-leveraged pump!
Below is the chart of what Icahn actually bought (from the 13D [3]):
[4]
And here is what footnote (1) and (2) say:
(1) Represents shares underlying American-style call options purchased by the applicable Reporting Person in the over the counter market. These call options expire on September 4, 2014.
(2) This amount represents the cost of an applicable American-style call option to purchase one Share. The per share exercise price of these call options is $36.05. This exercise price will be adjusted to account for any dividends or other distributions declared by the Issuer prior to exercise of the options.
And that is how you punk the short in a company that is a melting ice cube, and is eventually going out of business, but not before numerous mega short squeezes.
* * *
Thanks to Mr. 'Blockbuster' Icahn [5], who just announced a 10% stake in the company (for reasons that seem to a pure punt on it being bought out), NFLX is trading up 15% on the day and has filled its Q2 miss gap. He has been building a stake since early September (according to filings) and we suspect was pissed when Q3 earnings stumbled the stock back to below his average fill (allegedly). Of course hundreds of knife-catching hedge funds are thanking the great investor for giving them their exit from Q2 earnings' miss - it seems that you do indeed get a second chance to sell... cue CNBC M&A renaissance chatter...
[6]
Unbelievable - Icahn bought calls (not shares):
- (1) Represents shares underlying American-style call options purchased by the applicable Reporting Person in the over the counter market. These call options expire on September 4, 2014.
- (2) This amount represents the cost of an applicable American-style call option to purchase one Share. The per share exercise price of these call options is $36.05. This exercise price will be adjusted to account for any dividends or other distributions declared by the Issuer prior to exercise of the options.