Netflix Will Raise $1 Billion In Debt Offering For Content, Production & More

Netflix has announced that it will raise $1 billion in two series – one in US dollar denominated notes and the other in euro denominated bonds.

The company said that these investment funds would be used for “general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions”.

In both April and October 2019 Netflix announced investment rounds of $2 billion. In the year prior, the company raised $1.9 billion in April and $2 billion in October.

Acquiring and producing content

Depending on how long the COVID-19 pandemic lasts for, Netflix may need to turn to already made content from external sources, though the company said in its Q1 financial report: “While our productions are largely paused around the world, we benefit from a large pipeline of content that was either complete and ready for launch or in post-production when filming stopped.”

In its letter to shareholders Netflix stated that cash spending on content would be delayed due to the halting of original productions, which would improve the company’s free cash flow. In the first quarter of the year free cash flow totalled $162 million, compared to -$460 million in the corresponding quarter a year ago.

The company spent roughly $15 billion on content last year. In the first quarter of 2020 it spent $4.8 billion on content.

Many economists seem to think that Netflix is not in great need of the added capital, given the largely positive Q1 report (though the company did flag uncertainty given the times ahead). Jeffrey Wlodarczak, an analyst at New York’s Pivotal Research Group, told the La Times that the current economic climate could create opportunities for Netflix to buy another company or acquire more content.

“They are just being opportunistic and prudent after very strong results and given the uncertain global economic outlook,” Wlodarczak said.

Higher pay packets for C-level executives

The investment raising announcement made yesterday came alongside a regulatory filing that revealed Netflix’s C-suite executives received sizeable pay rises in 2019.

Netflix CEO Reed Hastings’ compensation rose by 7% to $38.6 million last year. Meanwhile the Chief Content Officer Ted Sarandos received $34.7 million, representing an increase of 17%.

Hastings’ increase in compensation was derived from stock options awards, his actual salary remained unchanged at $700,000.

Sarandos’ salary was bumped up from $6 million to $18 million, while his stock options awards fell by $1 million.