Finally, the video streaming giant Netflix is launching a very new debt offering of $2 billion to fund their latest business of cash burning content. This has resulted in a drop of 1.26% of shares of Netflix. This Monday, Netflix announced that they have an intention of offering about $ 2 billion in the form of unsecured senior notes which can be both in dollar and euros. This money will be used by Netflix to acquire more contents and developing the company.
Netflix has previously used junk bonds to fund this business. This April, Netflix raised about $1.9 billion. This is the first tie that the debt of Netflix in the market will scale up to $10 billion. All the investors can see a growth of 6.38% in US notes and the growth of 4.63% in the euro notes.
Last Tuesday, Netflix posted the third quarter earnings and because of that, the stock prices went up 14% immediately. Right now, Netflix is working on content that they are creating and this is the reason why they need a lot of money. Netflix has openly announced that there will be a cash burn of about $3 billion in the year 2018.
Netflix is borrowing cash in a systematic manner so that they do not end up increasing the debt. Investors of Netflix are more likely to focus on the break even next year because there will be a lot of free cash flow till 2019. The share prices of Netflix are up 74% this year and it is hoped that by next year the share prices will skyrocket.