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Carl Icahn cuts Netflix stake, pockets $800 million profit

By Angela Moon and Jennifer Ablan

NEW YORK (Reuters) - Billionaire investor Carl Icahn has cashed in big on Netflix Inc, taking advantage of a 457 percent gain in its shares since he bought more than 9 percent of the streaming video company only 14 months ago.

Icahn, whose firm acquired Netflix shares for an average price of $58, is booking profits of between $700 million and $800 million on the 3 million shares he sold in the 12 days beginning on October 10 and ending on Tuesday, according to an SEC filing issued after the market closed on Tuesday.

The biggest sales took place on Tuesday with Icahn selling 2.4 million shares at $341.44 for about $819 million. The Tuesday sale alone generated a profit of about $645 million. Icahn still holds 4.5 percent of Netflix, down from 9.4 percent in June -- the last time he publicly disclosed his holdings.

Icahn, whose Icahn Enterprises has assets of approximately $29 billion, said in the filing that "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."

He added in the filing and a subsequent 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."

(Hastings is the CEO of Netflix; Sarandos is the chief content officer; Spacey is the lead actor of Netflix's hit television series "House of Cards")

In multiple media appearances, Icahn has said his son Brett Icahn, a portfolio manager at the firm, was responsible for the Netflix investment and for maintaining the firm's 9.4% stake through a significant 2013 rally in the company's stock.

Icahn's massive success with Netflix contrasts with an earlier attempt to make money out of the video business when he took a stake in Blockbuster back in 2004. Icahn called his play for the now bankrupt movie renter his "worst investment" in his 30-plus year career.

Netflix shares plunged more than 9 percent to $322.53 on Tuesday ahead of Icahn's announcement on speculation that he was reducing his stake.

After rising nearly 10 percent at the open following its announcement of stronger-than-expected results late on Monday, Netflix, the year's best performer in the S&P 500 index, suddenly faced a wave of selling. Volume spiked to 27 million shares, several times its normal levels, a sign of hot money leaving the stock.

Coming into the day, Netflix shares were up 282 percent on the year.

The stock's gains this year have led many analysts to say shares were vastly over valued, with a price-to-earnings ratio of 113 that dwarfs the 16.44 ratio of its industry peers. Last week the stock jumped 11 percent ahead of the earnings.

While more than a dozen brokerages raised their price targets on the stock following the strong results, many of the targets remain below Netflix's current share price, a sign that even accelerated growth may not be enough to justify the company's nearly $21 billion market cap.

In a letter to shareholders released in conjunction with the results late Monday, Chief Executive Hastings and Chief Financial Officer David Wells downplayed some of the recent share gains, calling them reminiscent of similar surges in 2003, which preceded a sharp pullback. At that time, "we had solid results compounded by momentum-investor-fueled euphoria," they wrote.

Short interest in the stock fell about 15 percent from mid-September to 6,956,792 shares as of September 30, according to the latest data from Nasdaq. It was the lowest level since the end of July, suggesting that despite the stock's stunning gains, fewer investors are betting on the downside.

Tuesday's selling in Netflix spread to other big winners this year, including Tesla Motors Inc, Salesforce.com, and Priceline.com. All were lower on the day.

"Once (Netflix) started weakening, you started seeing other momentum names with high betas that have been big winners this year and recently all started coming under significant pressure," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said referring to stocks that are generally more volatile than the rest of the market.

(Additional reporting by Doris Frankel and Caroline Valetkevitch; Editing by Bob Burgdorfer)

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