text: With Carl C. Icahn knocking on its front door, Netflix has put up the traditional first line of defense against a corporate takeover. 
   
   The company announced on Monday that its board had adopted a shareholder rights plan, or poison pill, just days after Mr. Icahn disclosed he had acquired a 9.98 percent stake. 
   
   Netflix said the plan was meant to protect the company and shareholders from “efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders.” 
   
   In a statement on Monday, Icahn Capital said that “any poison pill without a shareholder vote is an example of poor corporate governance, and find the pill Netflix just adopted is particularly troubling due to its remarkably low and discriminatory 10 percent threshold.” 
   
   “As one of the company’s largest shareholders we are concerned about the poor corporate governance at Netflix that these and other actions reflect,” the statement added. 
   
   The poison pill is intended to make it more expensive for Mr. Icahn to accumulate more Netflix shares. 
   
   Under the plan, the company is issuing one right for every common share. Each right enables a shareholder to buy one one-thousandth of a new preferred share at the exercise price of $350 per right. But these rights can be exercised only if an investor acquires 10 percent of the company without the approval of the company’s board. (Institutional investors can acquire up to 20 percent.) 
   
   In its statement, Netflix added: 
   
   In addition, if after a person or group acquires 10 percent (or 20 percent in the case of 13G institutional investors) or more of Netflix’s outstanding common stock, Netflix merges into another company, an acquiring entity merges into Netflix or Netflix sells or transfers more than 50 percent of its assets, cash flow or earning power, then each right will entitle the holder thereof to purchase, for the exercise price, a number of shares of common stock of the person engaging in the transaction having a then-current market value of twice the exercise price. The acquiring person will not be entitled to exercise these rights. 
   
   The rights plan will expire on Nov. 2, 2015. ||||| Netflix Inc. said Monday its board adopted an antitakeover plan intended to block activist investor Carl Icahn from expanding his nearly 10% stake in the streaming video and DVD-by-mail company. 
   
   Video From the Archive 
   
   Netflix shot up in the market when billionaire investor Carl Icahn purchased 10% of the company's shares on Wednesday, Oct. 31. As MarketWatch's Rex Crum tells Dan Gallagher, Ichan is seeking ways to maximize Netflix's shareholder value. (Photo: AP) 
   
   Under the plan, Netflix's shareholders will be given the right to acquire more stock if any individual investor acquires more than a 10% stake in the company, commonly referred to as a "poison pill." The plan is designed to dilute the value of the stock by flooding the market with additional shares, making it expensive for an investor to acquire a controlling stake. 
   
   "Adopting a rights plan is a very reasonable thing to do in light of the recent, and stealth, accumulation of stock and options by an activist investor," said a Netflix spokesman. The company said its board members weren't available for comment. 
   
   In a securities filing Monday, Mr. Icahn called Netflix's poison pill "an example of poor corporate governance" because the company didn't seek a shareholder vote. He also called on Netflix to allow for its full slate of directors to stand for election each year, rather than the staggered system it has today where only a portion of the board stands for election in a given year. Mr. Icahn didn't return requests for further comment. 
   
   "Our board continuously reviews our governance structure," said the Netflix spokesman. "Its goal is to maximize long-term value for shareholders." 
   
   Mr. Icahn on Oct. 31 disclosed he had acquired a 9.98% stake – roughly 1% directly and the rest in options—calling the company's shares "undervalued." In an interview with The Wall Street Journal at the time, he suggested he might seek buyers for the Los Gatos, Calif.-based company. 
   
   Investors welcomed Mr. Icahn's move, sending Netflix's shares up 14% last Wednesday. Netflix had lost nearly three-quarters of its value following several missteps last year, including a jacked-up price for its subscribers in July 2011 and an ill-fated plan to split the company's DVD-by-mail rental business from its Internet video-streaming business. 
   
   Enlarge Image Close Annie Tritt for The Wall Street Journal Netflix CEO Reed Hastings 
   
   Netflix lost roughly a million of its customers following the announcements and said last month it was behind schedule toward a previous goal of boosting its subscriber base by seven million U.S. streaming-video subscribers this year. 
   
   "If Icahn has a great deal of support from other shareholders, he may press ahead for policy changes or board members of his choosing," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "It becomes a game of chicken." 
   
   Netflix is the second company to attempt to thwart Mr. Icahn in recent days. Specialty truck maker Oshkosh Corp. also adopted a poison pill late last month after Mr. Icahn, who holds about 9.5% of the company, floated a potential takeover. 
   
   Enlarge Image Close Bloomberg News Carl Icahn, billionaire investor 
   
   The Netflix poison pill would apply to shareholders as of Nov. 2, when the plan was adopted unanimously by the company's seven-person board, which includes Chief Executive Reed Hastings, who holds about a 4.5% stake. The poison pill plan will be in effect for three years. 
   
   Netflix faces a growing list of competitors in its core U.S. market, including Amazon.com Inc., which has been adding streaming content to its Prime membership program, Hulu LLC, and Time Warner Inc.'s Home Box Office unit. 
   
   Profits at Netflix have fallen as it expanded outside the U.S. into Europe, as well as South America. Overseas markets typically require content deals region by region, making it an expensive proposition. 
   
   Mr. Icahn, who is known as an unrelenting activist shareholder, may not go away quickly. "We have something to say and I would say this is going to play itself out pretty well," he said last Wednesday. 
   
   Write to Greg Bensinger at greg.bensinger@wsj.com
target: – Following billionaire investor Carl Icahn's purchase of a 10% stake in Netflix, word is out that he may push the company to sell—so Netflix has opted for the "poison pill" approach. The company is giving shareholders the right to snap up more stock if any single shareholder acquires more than a 10% share of the firm, thus—in theory—diluting the value of shares, the Wall Street Journal reports. The plan would make it very costly to buy up a controlling stake. Also known as a shareholder rights plan, the poison pill is standard practice for companies fighting a takeover, the New York Times notes. "Adopting a rights plan is a very reasonable thing to do in light of the recent, and stealth, accumulation of stock and options by an activist investor," a Netflix rep says.