Netflix Probably Should Be Bankrupt, Stock Closer To Zero
While I disagree with his view of Amazon.com (AMZN) , I'm on board with pretty much everything else, particularly:
Netflix'slatest sleightof hand is the move to explore taking advantage of the current low interest rate environment, while stating ithas sufficient cash on hand to fund expenses. This is not true. In fact, if Netflix had not issued additional debt, there is a strong likelihood of financial disaster in 2013.
This same argument was used last time Netflix sought financing in late 2011, but this time around, people seem to fully believe the argument. Ironically, Hastings' spin is more misleading than in 2011.
On Netflix's $500 million debt deal, Mintzmyer nails it again:
The debt deal by itself makes sense. The bond markets are starved for yield and Netflix needs the cash. I'm not decrying the offering; my point is that this isn't a Microsoft (MSFT) or Intel (INTC) type of advantage play -- this cash was needed to ensure operations, and Netflix is extremely lucky to receive it.
Bingo. Those three paragraphs sum up the Netflix story.
The second I read about the company's plans to "raise additional cash through new debt financing" in its Q4 shareholder letter, I called B.S. And if you check point No. 4 at the very end of this article from Jan. 17, you'll see that I called it before it happened.