Monday, November 21, 2011, 05:46 pm
Netflix stock hit after it sells bonds, issues stock for $200 million capital infusionNetflix announced it would be selling $200 million in convertible bonds to a venture capitalist, as part of an effort to raise money for "general corporate purposes," news that worried investors and sent the company's stock price down 7.7 percent in after market trading.
Netflix entered its "note purchase agreement" with Technology Crossover Ventures, a firm the Wall Street Journal notes has acted as a late stage investor in other large tech firms, including Groupon.
The company separately filed a registration with the SEC for a stock offering of "an indeterminate amount of securities to be offered at an indeterminate prices." The firm's filing notes "an investment in our common stock involves a high degree of risk."
The company noted in its filing, "we intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures."
This summer, Netflix separated out a streaming subscription option from its DVD mailing business, and subsequently announced plans to split the two offerings out into separate companies, a move that complicated and raised the overall price customers would pay to use both services.
After a consumer backlash, the company announced it would abandon the split, but it continues to report that "our domestic streaming and DVD gross cancellations continued to steadily decline in October and the first half of November."
The filing notes the boondoggle as an ongoing risk, stating that "If we are unable to repair the damage to our brand and reverse negative subscriber growth, our business, results of operations, including cash flows, and financial condition will continue to be adversely affected."
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