Netflix Announces Plan to Raise $400 Million

Netflix, which is spending billions of dollars to license and create content to feed its massive streaming business, said Tuesday it will raise $400 million in debt.

our editor recommends

Netflix Stock Surges as Earnings Beat Analyst Expectations

Analyst Upgrades Netflix Stock, Cites Disney Deal, 'Improving Fundamentals'

Netflix recently reported that it had 27.2 million subscribers to its domestic streaming business and its contractual obligations for the movies and TV shows that its streaming users watch is $5.6 billion, with more than $2 billion due within a year.

STORY: Netflix Stock Hits 52-Week High

The company said Tuesday it will offer $400 million in notes to qualified buyers, and $225 million of that will be used to pay off existing debt.

Investors seemed mildly enthusiastic about the plan, as shares rose 4 percent Tuesday to $169.12.

Wedbush analyst Michael Pachter, who predicts Netflix stock could plunge to $55 in the next year or so, nevertheless said that its plan to raise $400 million is a good one in the short term because it "will likely provide interest rate relief and temporary breathing space from hefty content deals."

He didn't change his "underperform" view of the stock, though.

"Netflix's newest capital raise reflects the continuing cost escalation of its streaming business," he wrote Tuesday. "We believe that lack of free cash flow and the risk incurred by increasing debt makes Netflix a risky investment."