The Board of Directors at Netflix have adopted a new stockholder rights plan today, while the company itself has declared a dividend distribution of one right for each outstanding share of Netflix’s common stock.

The rights plan introduced by Netflix is designed to try and protect both the company and it’s stockholders from “efforts to obtain control of Netflix that the Board of Directors determines are not in the best interests of Netflix and its stockholders.”

It is unclear why the rights plan has been implemented at this particular moment, but it’s almost certain to be a reaction to the 10 percent stake in the company disclosed by investor Carl Icahn last week.

In a press release issued by Netflix today, the company said that the new rights plan was not intended to interfere with any future merger or tender that is approved by the Board of Directors.

A ‘right’ will be issued for each existing share of common stock which was outstanding at the close of business on November 2. Oddly, Netflix has revealed that the rights cannot be used for now and will transfer with the shares of Netflix’s common stock. If the rights do become active though, each right will give stockholders the chance to buy one-thousandth of a share, which will be part of a new series of participating preferred stock at a price of $350 per right.

As an outsider, it looks like the rights plan will act as a last resort shield for Netflix to protect itself against any hostile takeovers in the future. The press release later adds that the rights will be active only in the following situation:

“…if a person or group acquires 10 percent (or 20 percent in the case of institutional investors filing on Schedule 13G, as described in the Rights Plan) or more of Netflix’s common stock in a transaction not approved by Netflix’s board of directors.”

However, if Netflix merges into another company, or an acquring company merges into Netflix, or Netflix decides to sell more than half of its assets, each right will also be activated, allowing the holder to purchase shares as described above.

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