On June 24th, Carl Icahn sent a Tweet that marks the end of his involvement with Netflix (NYSE:NFLX).
The profitable three-year relationship with the company left Icahn with $2 billion in gains. The billionaire made around $960 million from the last trade alone. Icahn sold off his remaining 1.4 million shares right before the stock reached an all-time high. Since then, the stock slightly dropped in value.
Last week, Icahn talked to CNCB about his Netflix exit and cable competition: “Netflix was a no brainer when we first went into it. You couldn’t compete with Netflix because they were starting the year with like $2 billion flowing into them, and Reed Hastings did a great job in building it up. I think the competition is somewhat easier if you see the secular change going on where they’re building service, where they can go over the top, and there’s going to be cable competition.” On the other hand, the billionaire does not have the same concerns for Apple yet. He sees Apple positioned just as well as Netflix used to be: “I just don’t see how … you compete with Apple because of the great ecosystem they’ve built.”
Icahn initiated his Netflix position in the third quarter of 2012 at an average price of $58 per share. His 3Q2012 SEC filing shows a 1.2 million shares position worth $321 million or 9% of the company. By the fourth quarter of 2013, the billionaire held 5.5 million shares and became one of the largest Netflix shareholders. Icahn continued to hold his stake for 14 months. Over these 14 months the stock gained 457% in value. In October 2013, Icahn started on selling the stock. In less than two weeks, the billionaire sold 3 million Netflix shares, making a profit of $800 million. Then Icahn famously noted in his filing: “as a hardened veteran of seven bear markets I have learned that when you are lucky and/or smart enough to have made a total return of 457 percent in only 14 months it is time to take some of the chips off the table,” and followed with a Tweet: “I want to thank Reed Hastings, Ted Sarandos and the rest of the Netflix team for a job well done. And last but not least, I wish to thank Kevin Spacey.”
After the October 2013 sell, Icahn continued to hold 2.6 million Netflix shares valued at $1 billion. Somewhere between the first and second quarter of 2014 he sold almost half million shares at an estimated profit of $200 million. In less than two years, the billionaire made $1 billion from his Netflix investment alone. And his success with Netflix continued.
Between 3Q2014 and the first quarter of this year, Icahn’s Netflix position remained unchanged at 1.4 million shares. Over the last 3 years since he initiated his position, Netflix increased its share value to the current $39B while the stock rose 868%. In 2015, Netflix has been one of the S&P 500’s top performers.
On Tuesday last week, Netflix announced a 7-1 stock split, making the company more affordable to individual investors and employees. In light of the announcement, the stock reached a record high on Wednesday at $680 per share. The same day, Icahn announced that he sold all his shares. Since Wednesday the stock dropped over 3%.
While it is unclear what the future holds for Netflix investors, following the smart money was most likely a profitable strategy for Icahn’s followers.