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Slim Shady
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A retired hedge fund manager with over 20 years of experience in financial markets. Audited returns before fees of my hedge fund beat the S&P 500 by over 9.5% per year for over ten years. I have earned the CFA designation and am formerly a CPA.
  • The Netflix Death Spiral Continues 3 comments
    Nov 21, 2011 5:33 PM | about stocks: NFLX

    Netflix announced that it will be selling $200 million of zero coupon Senior Convertible Notes due in 7 years to Crossover Technology Ventures (CTV), with a conversion price of $85.80.  CTV was their original venture backer who has subsequently sold all of its shares.  It is also where former CFO Barry McCarthy landed.

    As a condition to CTV giving them $200 million of cash that is Senior and Convertible, they are requiring that Netflix raise an additional $200 million of stock to non-affiliated 3rd parties.  The stock is currently trading at $70.00 in after hours.

    In the last two years, Netflix has spent $410 million repurchasing its shares at a gross price of $117 and an average effective price when taking into consideration share issuance from option excercises of $336 per share.  Even in the 3rd quarter ended September 2011, they spent $40 million repurchasing shares at $218 per share and on the year spent $200 million repurchasing shares at $222.  Now they have to sell $200 million of stock at the current market price, which if they're lucky, will be $70 per share less underwriting fees to have the ability to sell $200 million of debt that converts into stock at $85.80.

    Stocks: NFLX
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Comments (3)
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  • Andrew Noland
    , contributor
    Comments (131) | Send Message
    nice analysis. You get it. Could you explain how to calculate the average effective price of share repurchases including option exercises ?
    17 Feb 2012, 10:52 AM Reply Like
  • Slim Shady
    , contributor
    Comments (474) | Send Message
    Author’s reply » It's been awhile, but I would take the amount spent on "Repurchases of common stock" less the "Proceeds from issuance of common stock upon exercise of options" then divide that amount by the difference in the Ending Shares Outstanding plus the average diluted shares for the period that I'm evaluating.
    23 Feb 2012, 11:15 AM Reply Like
  • Andrew Noland
    , contributor
    Comments (131) | Send Message
    Ok. Clever. Thanks
    23 Feb 2012, 05:37 PM Reply Like
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