Netflix on Monday announced that they have raised $400 million by issuing more debt and stock in an attempt to expand their operations while earning back the 800,000 customers they lost after raising subscription costs by 60%.
Stock prices fell sharply on Monday in extended trading before rebounding to lose just 87 cents on the day. Netflix shares were down 1% late Monday with a closing price of $73.60. Netflix shares were trading at a high of $305 in mid-July, just before Netflix angered their customer base and became the laughing stock of the DVD rental business when they attempted to launch and then quickly ditched their Qwikster program.
Netflix ended September with 23.8 million U.S. subscribers while attempting to expand their business in Latin America and Great Britain.
Despite the company’s recent fund raising they are said to have $366 million in cash-on-hand and short-term investments however the company is also experiencing higher subscription rates from TV and Movie providers. In October the Starz Network announced that they would leave Netflix in February 2012 after the company refused to pay $300 million per year in licensing fees, up from their current $30 million deal.
Since the Starz deal fell apart Netflix has been attempting to acquire as many new partnerships as possible, racking up $3.5 billion in rights to stream Internet video with higher costs expected in 2012 and beyond.
Under their new financing round Netflix issued $200 million in convertible notes to Technology Crossover Ventures while their debt offering required the sale of another $200 million in shares to be sold by November 28, volume they already reached by selling 2.86 million common shares at $70 each, a 6 percent discount from their $74.47 closing price on Monday.
Under their fundraising effort their convertible notes will mature in December 2018 and will not require an interest payment but will allow Technology Crossover Ventures to convert the notes to stock valued at $85.80.
Do you think Netflix can acquire the relationships necessary to attract new users and continue to expand?