NetFlix 2015 Annual Report Download - page 18

Risks Related to Our Stock Ownership
Provisions in our charter documents and under Delaware law could discourage a takeover that
stockholders may consider favorable.
Our charter documents may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable because they:
• authorize our board of directors, without stockholder approval, to issue up to 10,000,000 shares of
undesignated preferred stock;
• provide for a classified board of directors;
• prohibit our stockholders from acting by written consent;
• establish advance notice requirements for proposing matters to be approved by stockholders at
stockholder meetings; and
• prohibit stockholders from calling a special meeting of stockholders.
As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under
Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its
capital stock unless the holder has held the stock for three years or, among other things, the board of directors has
approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of
us.
In addition, a merger or acquisition may trigger retention payments to certain executive employees under the
terms of our Amended and Restated Executive Severance and Retention Incentive Plan, thereby increasing the
cost of such a transaction.
Our stock price is volatile.
The price at which our common stock has traded has fluctuated significantly. The price may continue to be
volatile due to a number of factors including the following, some of which are beyond our control:
• variations in our operating results, including our membership acquisition and retention, revenues,
contribution profits, net income and free cash flow;
• variations between our actual operating results and the expectations of securities analysts, investors and
the financial community;
• announcements of developments affecting our business, systems or expansion plans by us or others;
• competition, including the introduction of new competitors, their pricing strategies and services;
• market volatility in general;
• the level of demand for our stock, including the amount of short interest in our stock; and
• the operating results of our competitors.
As a result of these and other factors, investors in our common stock may not be able to resell their shares at
or above their original purchase price.
Following certain periods of volatility in the market price of our securities, we became the subject of
securities litigation. We may experience more such litigation following future periods of volatility. This type of
litigation may result in substantial costs and a diversion of management’s attention and resources.
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