Netflix is borrowing another $2 billion. Investors don't seem to mind
The streaming platform is selling $2.2 billion in bonds in the U.S. and Europe this week. The cash will be used to finance its cash-burning business producing original shows and movies. It ended up borrowing more than the $2 billion it had originally planned, after the offering was met with strong demand.Investors bid for at least three times the amount of debt on offer, and early price talk indicated that the 10½-year dollar bonds were expected to yield 5.5%.
It could also become tougher for Netflix to generate profits and cash in coming years. Multiple companies are moving in to compete in the streaming-video industry; content behemoth Disney just introduced a service to stream its content for $7 a month, which is about half of the price of Netflix and AT&T’s streaming play, HBO Now.
What’s more, the junk-bond market is going through a dry spell for issuance. As of Tuesday, companies had sold 20% less in high-yield bonds for the month than they did last April. On top of that, Netflix hinted on its earnings call last week that it may not raise much more money in bond markets.
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