That's only partially true. Unlike most mere mortal investors, Icahn can put the cart before the horse. He could have said he was buying NFLX because he hears Mitt Romney will take the CEO gig if he loses the election and the stock would have moved higher. That would have become the hot rumor. The media would have lapped it up! Icahn makes the news. He doesn't report it. He doesn't react to it. He took the oldest rumor on Wall Street and gave it instant credibility. Because, to this point, it had none. That said, I believe in the irrationality of tech companies such as Microsoft ( MSFT) as much as I do my own instinct and intellect. With that mind, irrelevant Netflix buyout chatter contains some meaning. In other words, it wouldn't shock me if somebody makes the move. From a Netflix perspective, it makes all the sense in the world. I advised Reed Hastings, on several occasions, to sell his DVD division before or shortly after he shot it in the back. He refused. It's been about a year since Netflix went to the market to fundraise $400 million it claimed it didn't really need. Why didn't Netflix just take out one of those lines of credit? Lots of big, healthy companies -- even ones with cash -- do it, particularly when rates are low. That's an actual safety net. Why dilute your stock even a little bit? Easy answer, and it's the same answer to the absurd question: "Would you give Netflix what amounts to a loan?" More to the point with Icahn: "Would anybody really buy Netflix, as it stands today?" In a rational world, "absolutely not" spews freely as the answer to both questions. Netflix has, at a minimum, $5 billion in streaming content-related off-balance-sheet obligations, with roughly $2 billion due in less than a year. To keep it simple for us non-MBAs, that's debt.
While I appreciate Netflix's recent shift in strategy -- it appears to be spending less or, at the very least, spending smarter -- it's in no position to robustly handle its obligations. Another round of fundraising would not surprise me a bit. So, that's the logical answer. If you're Microsoft or Amazon.com ( AMZN) or any of the other rumored suitors, why would you take on somebody else's problem? It makes zero logical sense. MSFT, AMZN and other big names can -- and AMZN has -- do these content deals Netflix is on the hook for on their own. But because logic does not always prevail ... and because, speaking of illogic, Steve Ballmer is still the CEO at Microsoft, I can't rule out a takeover. That's where the company-killing, morale-crushing stubbornness of Reed Hastings comes into play. He refuses to do anything other than dig a deeper hole with international expansion to generate more revenue. Any CEO with his shareholders' best interests in mind would have been shopping this thing around for months. Doing whatever it takes. Offer to step aside. Make the pledge that you're willing to start from "the bottom" and work in a DVD distribution center until you can prove you deserve to run the show again. Icahn knows all of this. He's no fool. But he's playing the media like a gaggle of fools. However, he's not playing Reed Hastings for a fool. Hastings knows the score. I just don't think he has any idea how to move forward. I wonder if Hastings should phone former Blockbuster CEO John Antioco. Antioco had to deal with Icahn back in the day. Reed knows all about how that went down. Of course, it would be poetically justified if Antioco refused to take Hastings' call. That's apparently what the deer-in-the-headlights CEO is doing to Icahn right now. Scary times at Netflix again. Almost certain chaos behind the scenes. Manic strategizing. If you're long, you better hope Hastings really learned from last year's mistakes. At the time of publication, the author held no positions in any of the stocks mentioned in this article. Follow @RoccoPendola