The board of film rental firm Netflix has adopted a "poison pill" strategy to ward off a potential hostile takeover bid by activist investor Carl Icahn.

The shareholder rights plan would flood the market with newly issued shares if anyone buys more than 10% of the firm.

Mr Icahn disclosed last Wednesday he had accumulated a 9.98% stake.

Netflix shares have lost three-quarters of their value since peaking in July 2011, after an up-to-60% jump in its prices led to a drop in subscribers.

An aborted plan by management to spin off its DVD-rentals-by-post business in order to focus on online streaming also backfired, as many customers balked at the resulting need for them to create two separate accounts.

Although the price rise generated a short-term rise in profits last summer, in the first nine months of this year profits fell by 95% from a year earlier as customers walked away, and as the company bore the cost of an aggressive international expansion.

The "poison pill" is a strategy commonly used by management of a listed company to protect themselves from investors they fear may oust them following a takeover, and Mr Icahn has been on the sharp end more than once before.

However, the 10% trigger threshold - tailoured for Mr Icahn - is unusually low.

Netflix's board has set a higher 20% threshold if the shareholder is a financial institution rather than an individual investor.

Mr Icahn called the management's move - which was not put to a shareholder vote - "an example of poor corporate governance", and criticised the fact that only a third of the company's board is up for election by shareholders each year.

The investor has said that he thinks Netflix is undervalued and would make an attractive acquisition for other companies. Microsoft and Amazon have been speculated as possible buyers.

Mr Icahn has not indicated whether he would seek to make changes in management or company policy - something he has done at other companies he has invested in.

Netflix's board said that the poison pill was "intended to protect Netflix and its 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".