News earlier this week that struggling movie streaming service Netflix had raised $400 million battered already damaged Netflix with more bad press, and stock reached a 20-month low in the market.
Investors- already skittish after a months-long bad press bonanza stemming mainly from a massively unpopular price hike as well as an ill-received and soon reversed name change- have taken a dim view of Netflix’s latest move. The announcement is seen by some analysts and investors as “desperate,” and indicates the company may anticipate struggling with “cash-flow problems for a while,” Bloomberg notes. Analysts also “questioned the wisdom of selling 2.86 million shares of stock at $70 apiece to raise $200 million after spending nearly the same amount in the first nine months of the year to buy back nearly 900,000 shares at an average price of $218,” the Seattle-Post Intelligencer reports.
Netflix again tried to reassure investors the company is doing all it can to reverse subscriber exodus as well as bolster its streaming content to retain current customers. As to the $400 million cash influx, Netflix spokesman Steve Swesey said:
“Netflix is raising money now to strengthen the balance sheet… We have no cash or general liquidity needs, and therefore have no immediate plans to use this capital.”
In an earlier stock filing, the company stated:
“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.”
Bloomberg also points out that Netflix anticipated being spread a bit thin for the next few quarters as it shores up content selection and continues its expansion into Latin America and early 2012 UK launch.