Netflix aims to raise $400M for new content, will lose money in 2012

By Andrew Couts November 22, 2011

As its stock continues to falter, Netflix has announced that it plans to sell stocks and bonds in an attempt to raise $400 million, reports Business Insider. The money will likely be used to pay for the acquisition of new content, which analysts believe is coming at a higher price than previously anticipated.

Of the $400 million, half will come from the sale of bonds, which can be converted to stock, to Technology Crossover Ventures, which will also have the ability to appoint one person to Netflix’s board of directors, as part of the deal. The bonds are convertible into stock at a price of $85.80 a share.

Netflix is currently trading at roughly $75 a share, down from its high of nearly $300 a share, which the company reached five months ago, prior to a series of detrimental missteps.

The other $200 million will come from the sale of stock to T. Rowe Price. The sales of additional stock, which dilutes earnings for stockholders, was met with negativity in after-hours trading, with Netflix’s stock dropping another 6 percent.

Adding to the bad news, Netflix also said in its filing with the Securities and Exchange Commission for the stock sale that it expects to loose money throughout next year.

“We expect that consolidated quarterly revenue will be relatively flat until we can achieve positive net subscriber additions,” wrote Netflix in its SEC filing. “As a result of the relatively flat consolidated revenues and previously announced increased investment in our International segment, we expect to incur consolidated net losses for the year ending December 31, 2012.”

The problems for Netflix began after it announced a 60 percent monthly price hike for customers who subscribe to both its online streaming and DVD-by-mail services. A later announcement that it would split its streaming and DVD services into two companies, with DVD-by-mail rentals being re-branded under the name Qwikster, added to the wave of customer cancellations. The company later scrapped its plans to separate the two sides of its business.

Netflix says that it expects its quarterly revenue earnings to remain relatively flat until it can “reverse the negative customer sentiment” toward the Netflix brand, and begin bringing in new subscribers.

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