Netflix stock has gained 0.6% to $277.04. That’s better than the Dow Jones Industrial Average’s advance of 41.74 points, or 0.2%, to 26,811.94. in-line with the S&P 500’s 0.6% rise of 3,004.86, but lagging the Nasdaq Composite’s 0.8% gain to 8,157.33.
Netflix is selling $2 billion in debt in dollars and euros, but the debt isn’t being sold directly to the market but to “persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.” That’s a fancy way of saying that it will sell debt to institutions. And Netflix will determine the terms of the debt in discussion with the buyers.
That Netflix needs to raise money is no surprise. In Barron’s cover story on the streaming wars this past weekend, Jack Hough argued that its cash burn would be a drag on the stock. “Netflix has made fools of doubters for years, and no company spends more on content per customer dollar. That’s an excellent reason to subscribe, but the company’s aggressive cash burn, combined with rising competition, make the path from here risky for shareholders,” he wrote. “Investors have lately turned skeptical on cash-burning companies, however, and Netflix, which has gone through more than $5 billion in the past three years, is expected to consume another $7 billion over this year and the following two, before generating positive free-cash flow in 2022.”
Hough preferred Comcast (CMCSA) to Netflix and other streamers.
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Write to Ben Levisohn at Ben.Levisohn@barrons.com