No Black Friday for Netflix This Year (Or Next Year)

Posted by · November 23, 2011 2:10 pm

After awhile, one cannot help but feel sorry for the company formerly known as Qwikster, er, I mean, Netflix. Though their wounds have been primarily, if not completely self-inflicted, one must eventually wonder when continual stream—no pun intended—of bad news is going to end once and for all.

For those who have already reached that point of questioning, it is clear that the answer is not anytime soon.

Yesterday, Netflix announced that it is going to be selling approximately $200 million in shares, as well as another $200 million in convertible bonds, in order to raise some much-needed cash. Validating a rather obvious consequence of such a move, the Wall Street Journal notes that stakeholders aren’t interpreting this move to raise capital through the issue of new stock as a “good sign.”

“Netflix has come under criticism from some analysts for its financial management, as the company has raised customer prices, shed subscribers, struck new entertainment-licensing deals and bought back its own shares at prices well above Netflix’s current stock levels,” WSJ contributor Shira Ovide observed.

As if the company’s sudden demand for cash wasn’t enough to make investors nervous, a Netflix spokesman didn’t assuage any of that tension when questioned about where all that cash was going. Currently, said the spokesman, there are no immediate plans, other than making that currently ailing balance sheet appear a little more, well, balanced.

Attempting to do a little damage control, Netflix CFO David Wells said that the extra cash “strengthened our balance sheet,” which in turn enabled Netflix to “remain focused on growing our streaming subscriptions and returning to global profitability after our launch of the U.K. [service] in 2012.”

To put it another way, shareholders should only expect stock prices to continue declining for at least another year before there’s any chance of seeing any sort of resurgence. And that, of course, is assuming that the company doesn’t go through another cycle of price hiking, faux service creating and eventual word eating in the meantime.

That is, after all, the root cause of their current financial predicament.