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Netflix to Sell $400 Million in Stock and Convertible Bonds (NFLX)

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NetflixNetflix Inc. (NASDAQ: NFLX), the Los Gatos, California-based DVD rental company, announced that it is selling $400 million in stock and convertible bonds to boost its capital.

Netflix plans to raise around $200 million through the sale of its common stock at a price of $70 per share to mutual funds and accounts managed by T. Rowe Price Associates. Netflix, which has struggled in the second half of this year, plans to raise the remaining $200 million by placing notes with funds affiliated with Technology Crossover Ventures (TCV).


Netflix is expected to use the proceeds from the stock and bond offering to help it meet the rising costs of streaming content and the ongoing financial burden of maintaining a DVD by mail business. The company expects to spend more than $3 billion in 2012 for the rights to TV shows and movies.

David Wells, CFO of Netflix, said that with the additional capital from two long-term oriented investors, the company strengthened its balance sheet and remains focused on growing its streaming subscriptions returning to global profitability after its launch in U.K. next year.

Although the offering strengthens Netflix’s balance sheet, shares tumbled on Monday as the sale confirmed recent fears about the company’s liquidity. Netflix shares dropped 4.60% to $74.47 on Monday. The stock touched a new 52-week low of $73.26 on Monday.

Netflix shares have been hammered in the second half of this year. In the last three months, the stock has fallen 63.71%.

The sharp drop in Netflix shares was sparked after the company announced a price hike in late July. The price hike led to a number of customers cancelling their subscription with the company.

In a SEC filing on Monday, Netflix disclosed that it expects to post a loss in 2012.

 

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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