On Monday, Netflix Inc made announcements that it will take more debt from the debt market which will be the second time in this year. The debt will be to raise an amount of $2 billion because the company is making heavy investments for the acquisition of content and also for the production of new shows in order to defy the increasing competition.
The debt has been taken for funding a very wide set of activities which mostly includes paying foe new content, as a steep decline in its share prices and prices of the bond has got the investors worry about the increasing costs.
Netflix stated that it has planned an expenditure of $8 billion on content, as the company has already spent $6.9 billion in its quarter three of the financial year on TV Shows,so their total expenditure for the current year will be somewhere near to $9 billion.
Netflix has raised $1.9 billion in November 2017 and therefore has sold $1.6 billion in debt. This brings the sum total of their debt to be equal to $8.4 billion the maximum part of which has been taken in the last three years, roughly doubling its long term debt and bringing it to 65% from the end of 2014.
However, the escalated increase in the number of international subscribers has evaporated the concerns of the company about the scope of expansion in developed markets where targeting a mass audience at a high profitable rate is possible.
But this does not in any way divert the attention Netflix is gaining for the brokerage charges it is paying for gaining customers in developing countries like India. Netflix, is the second costliest company of the FAANG Group which is trading at 115 times forward earnings.
Source: Reuters.com, Newschamber.com
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