Netflix Inc. (NASDAQ:NFLX) the video-streaming and DVD subscription service, agreed to sell $400 million in stock and convertible notes to bolster cash as it increases spending for online rights to films and TV shows.
Technology Crossover Ventures will purchase $200 million in zero-coupon senior convertible notes due 2018, and T. Rowe Price Associates Inc. funds will buy $200 million in stock, Netflix said on Monday in a statement. Technology Crossover Ventures, based out of Palo Alto, California, gained the right to name a Netflix director as long as it retains $100 million of the notes, according to filings. Jay C. Hoag, a co-founder of the venture capital firm, is already a Netflix board member, so the provision won’t lead to any immediate change.
Netflix fell 1.2% to $73.60 in extended trading after dropping as low as $68. The shares declined 4.6% to $74.47 yesterday in New York, their lowest close since March 31, 2010.
“Netflix is raising money now to strengthen the balance sheet,” said Steve Swasey, a company spokesman. “We have no cash or general liquidity needs, and therefore have no immediate plans to use this capital.” Netflix had $365.8 million in cash and short-term investments at the end of the third quarter, according to data compiled by Bloomberg.
Netfix reported the company acquired rights to films from Miramax, Metro-Goldwyn-Mayer Inc. and Lions Gate Entertainment Corp. for its U.K. service.
Netflix also reaffirmed a forecast for “about flat” U.S. streaming subscriber additions after a decline in October. “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,” Netflix said in a separate filing for the common stock.
Netfix shares were at 70.60, down 5.20% in the premarket at 8:32 am ET on Tuesday.