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Breakingviews: Netflix déjà vu

Tuesday, October 22, 2013 - 02:36

Oct. 22 - The online video company's shares have quadrupled this year, as they did a decade ago. CEO Reed Hastings should raise cash now to strengthen Netflix's position, argues Breakingviews.

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So Netflix had an amazing quarter they -- that last night but the really weird thing was. You see the CEO Reed Hastings talking down stock rob this is out of we've seen a couple of examples Ilan mosque. Where CEO basically says investors have let you get worried incredibly rare especially when it. Big option packages yes he has right are essentially you early onset of rhetoric is taking that he had ever rising stock price as a bit. He made the point he said look this has happened a bunch of times in the past like in 2003 the stock went up five times. It and then it fell right cut cut more and have the similar thing happen to. A couple of years ago. And he's he's worried he says you know whenever I see stories that -- Netflix is the best for. Best performing companies here I think I know this has happened before it's the volatility amid picnic indicate panic in a case like Netflix where some people including Hastings. Hey you know have a have a huge huge incentive structures. Based on the stock price the volatility can be a problem but but that what I'm -- -- and is your point which is. Hate rather than talking down the stock when he uses an opportunity raise some cash exact exactly that all the bears have focused on Netflix accounts for a long time. And right because the company has about over six billion of obligations to content partners it doesn't honor the words it's it's essentially its experience and that's not on its balance right. This effort content acquisition costs it would -- -- when they get a movie from Time Warner's right -- They picked him for. And the problem is that Netflix doesn't have a cash doesn't have the -- -- either so all the bears saying hey you know -- -- billion of cash on the balance -- but it's got 2.5 billion dollars obligation it's coming to you and excuse here. And Netflix have similar problems before they granite cash there are forced to -- its servers funding and so the worry is that you know maybe but it again. Instead of -- or do you know why do whatever morning invest take it one let's take advantage of it and do you like like they could sell 2000000003 billion dollars stock you like that like that it would dilute the stock price of course but. You know it would it into the stock would come down you'd have to assume that you'd actually neutralize this argument about your balance and exactly what it doesn't -- the company's stronger position over the long run. And in the -- it on call he said. You know don't get focused on the stade -- things look at what Netflix is going to be -- in ten years right. If that's the case -- -- -- raise cash now and cap that monies that are -- that are your lips to Reed Hastings years. Will be back with more breaking news tomorrow.

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Breakingviews: Netflix déjà vu

Tuesday, October 22, 2013 - 02:36