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The Morning Brief: Netflix Announces Split as Icahn Splits

Surging Netflix has found itself caught in a tug-of-war among the smart money set. The innovative media company initially excited investors Tuesday evening and early Wednesday after announcing plans to split its stock 7-for-1. The stock advanced 3.7 percent at the open, in fact. Of course, nothing really changes after a split, except psychologically. A split may make the stock more affordable for smaller investors and generally suggests a thriving company. However, Carl Icahn quickly dampened the enthusiasm when he tweeted Wednesday morning that he had sold his remaining shares of Netflix, telling followers that Apple “currently represents same opportunity we stated NFLX offered several years ago.” According to published reports, Icahn earned somewhere between $1.5 billion and $2 billion on his Netflix investment. It will be interesting to see what other hedge funds do with the stock now. For example, at the end of the first quarter, Philippe Laffont’s New York–based Coatue Management was the sixth-largest holder with 2.91 percent of the shares. At the SALT conference in May, Gil Simon of Orinda, California-based Apex Capital, which manages about $1 billion, told a small break-out session that he believes Netflix’s stock will triple and become the next $100 billion company. He was mindful that only three Internet company companies currently have $100 billion market capitalization: Google, Facebook and Amazon. Simon said Netflix is just getting around to expanding aggressively internationally and that the company is the buyer of choice for licensed and original content. “Its global subscription model and pricing power will translate into profitability well beyond consensus expectations,” he said. “I expect it to be fully global in the next two years.” He’s looking for a $2,000 share price in three years. The stock closed Wednesday at $678.64, down $2.55. It was at $565 when Simon made his prediction.

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Deutsche Bank raised its price target on Darden Restaurants to $79 from $72 one day after the restaurant company said it was planning to create a separate real estate investment trust (REIT). “Darden posted another solid quarter as the company’s unit-level focus of being better at the basics and cost-cutting initiatives continue to take hold,” the bank said in a note to clients. Darden’s largest shareholder is New York activist Starboard Value, which last year won a proxy fight with the company. The stock closed up 2 percent at $70.84.

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Omega Advisors’ Leon Cooperman cleared out his entire stake of Sandridge Energy, according to a June 19 regulatory filing. The New York hedge fund manager owned more than 24.3 million shares at the end of the first quarter.

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New York-based BlueMountain Capital Management and Chicago-based Citadel were two of several firms identified in a report as being investigated for possible collusion in the credit derivatives market. According to the Wall Street Journal, the subpoenas are related to a lawsuit filed by an investor who alleges 12 banks, data provider Markit Group and trade group, the International Swaps and Derivatives Association, engaged in anticompetitive practices in credit-default swaps.

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