Investments

Netflix To Sell Off $2 Billion In Bonds To Fund New Shows

Netflix is once again turning to the junk-bond market to help fund its extravagant spending on original TV shows and movies.

The video-streaming giant, which has countless hit TV shows is selling off $2 billion of senior unsecured bonds in dollars and euros.

The proceeds will be used to acquire and pay for new content. Netflix believes that this strategy will help it squash competitors such as Amazon when it comes to subscriber numbers.

Netflix's current $8.4bn of junk-rated bonds have increased from the $6.5bn that was reported at the end of 2017. The company previously issued $1.5 billion of debt in April and an additional $1.6 billion in October 2017. The video-streaming firm has been an inspirational story on the stock market. Shares have skyrocketed over the last ten years and, at one point this year, it briefly stripped Disney off their title as the world’s largest media company.

In an effort to continue its growth, Netflix is planning to spend more than $8bn on original shows in 2018, a $2bn increase from last year.

Netflix sent out a letter to investors reassuring them that even though they were spending such vast amounts of money purchasing content, they remain confident that the expenditure is actually an investment that will pay off generously with time, just as it had done in the past.

The company declared in its earnings release last week that it predicts to spend approximately $3 billion in cash this year and an additional $3bn next year.

It seems that Netflix might be on to something because profits more than tripled to $403 million in the quarter while revenue went up by 34pc compared to the same time last year, reaching close to $4 billion.

Investors, however, continue to look into the company's subscriber growth and financial plans as legendary media brands like Disney and HBO play catch-up by acquiring the technology needed to bring their TV shows and films to the web.

Netflix said it gained 7 million new customers in the three months prior to September, and now has a total of more than 137 million, 135 million of whom pay monthly subscription fees.

 





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