Analysts Continue to Criticize Netflix Capital Needs

Netflix Inc. (NASDAQ:NFLX) raised $400 million to meet funding requirements for content purchasing and to strengthen its balance sheet.

The company announced the pricing of concurrent common equity and convertible notes financings totaling $400 million. $200 million was raised through the registered sale of common stock to certain mutual funds and accounts managed by T. Rowe Price Associates (NASDAQ:TROW) and $200 million was raised through the private placement of convertible notes to funds affiliated with Technology Crossover Ventures (TCV).

Don’t Miss: Netflix: The Story Arc of Stock Collapse.

“With this additional capital from two long-term oriented investors, we have strengthened our balance sheet and remain focused on growing our streaming subscriptions and returning to global profitability after our launch of the U.K. in 2012,” said David Wells, Chief Financial Officer.

According to analysts, however, this indicates the company’s cash crunch could extend longer than anticipated and also illustrates that Netflix (NASDAQ:NFLX) was forced to raise capital in order to beef up its content inventory to meet growing competitive pressures. “It’s essentially saying, ‘We expect to continue to have cash-flow problems for a long time,’” said Michael Pachter, analyst with Wedbush Securities in Los Angeles, who has a “neutral” rating on the shares. “It’s a bad deal for shareholders and it looks desperate.”

Investing Insights: Netflix Financing: Performance is Deteriorating.