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Anti-Tilson ETF Goes Ballistic: Netflix Plunges After Company Announces Equity Raise In Sheep's Clothing
When we discussed the slow motion trainwreck that is the implosion of Netflix back on October 11, our only outstanding question was "when is the inevitable follow on equity offering coming?" We have the answer, and it is now. Netflix just announced in an 8-K filing that it has raised $200 million in convertible notes. The conversion price is a laughable $85.80 or just 16% above the closing price translating into 2.3 million shares of additional dilution, confirming that this is nothing short of an equity raise in sheep's clothing (on the buyer's terms at that), and indicates that the firm may have well entered a liquidity death spiral courtesy of a business model that still has to generate any substantial free cash flow. Naturally, the second investors realize this they will dump the stock in droves, which is horrendous news for Whitney Tilson, but amazing news for everyone long the Anti-Tilson ETF. In other news, it may just be time for Tilson to call it a career.
NFLX After Hours:
From the 8-K
The completion of the private placement of the Notes is contingent on satisfaction or waiver of customary conditions, as well as a requirement that the Company shall have raised at least $200 million in aggregate gross proceeds from the sale of its common stock to non-affiliated third-parties. The Purchase Agreement provides that the private placement to TCV will be completed on
(i) November 28, 2011 or, (ii) if the conditions set forth in the Purchase Agreement have not been satisfied on or prior to November 28, 2011, the first business day following the satisfaction or waiver of such conditions or
(iii) such other date as is mutually agreed upon in writing by the parties. No assurances can be made that the TCV transaction will close when expected, with the terms described herein, or at all.
The Notes will be issued under an indenture between the Company and a trustee (the "Indenture"). The Notes do not bear interest. The Notes will mature on December 1, 2018, subject to earlier conversion or repurchase.
The initial conversion rate for the Notes is 11.6553 shares of the Company's common stock, par value $0.001 per share ("Common Stock"), per $1,000 principal amount of Notes. This is equivalent to an initial conversion price of approximately $85.80 per share of Common Stock. Holders may surrender their Notes for conversion at any time prior to the close of business on the business day immediately preceding the maturity date for the Notes.
The Notes are the Company's general, unsecured obligations and are effectively subordinated to all of the Company's existing and future secured debt, to the extent of the assets securing such debt, and are structurally subordinated to all liabilities of the Company's subsidiaries, including trade payables. The Indenture does not limit the amount of indebtedness that the Company or any of its subsidiaries may incur.
Upon the occurrence of a change of control, which will be defined in the Indenture, each holder of the Notes will have the right to require the Company to repurchase some or all of such holder's Notes at a purchase price in cash equal to 120% of the principal amount thereof.
At any time following the six month anniversary of the closing date under the Purchase Agreement, the Company may elect to cause the conversion of the Notes into shares of the Company's Common Stock when specified conditions are satisfied, including that the daily volume weighted average price of the Company's Common Stock is equal to or greater than 130% of the then-applicable conversion price for at least 50 trading days (including the trading day immediately prior to the conversion date) during a 65 trading day period prior to the conversion date.
Perhaps the most important section is the EOD definition as whoever is dumb enough to buy these will have to deal legalese with this very, very soon.
The following events are considered "Events of Default," which may result in the acceleration of the maturity of the Notes under the Indenture:
- the Company's failure to pay when due the principal on any of the Notes at maturity, upon required repurchase, upon declaration or otherwise;
- the Company's failure to pay interest on any of the Notes for 30 days after the date when due;
- the Company's failure to give timely notice of a change of control (as defined in the indenture);
- the Company's failure to comply with its obligation to convert the Notes into shares of Common Stock upon exercise of a holder's conversion right;
- the Company's failure to perform or observe any other covenants or agreement under the Notes or the Indenture governing the Notes and the Company fails to cure or obtain a waiver of such default for a period of 60 days after receiving notice of such failure;
- A default by the Company under any debt (as defined in the Indentures) that results in acceleration of such debt, or the failure to pay any such debt at maturity, in an aggregate principal amount in excess of $25 million, and such acceleration has not been rescinded or annulled within 30 days; and
- Certain events of bankruptcy, insolvency or reorganization with respect to the Company or any significant subsidiary.
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So, can I watch "The Dumbest Guys In the Room" on Netflux yet?
If not, just turn on C-SPAN.
Ohhhh, snap!
Netflix should be renamed "Notflix"!
-John
http://johnu78.blogspot.com/p/items-for-sale.html
I thought was the very popular "Biggest Loser" show
No, that would be the Keith Olberman show.
More like the "Sorest Loser."
I heard it was the Chinese.
Yes, it stars Whitney Tilson and it's on Chapter 11. Uhhhhh, I mean channel 11.
Seriously, anyone who thinks this guy is someone other than a regular schmo who thinks he is smarter than everyone else and who tries to make 2 & 20 off of rich folks is diluted..........
Yet, methinks it took a while for ZH to catch up with Tilson.....if I recall.
i thought the article said anyone holding netflix after the issuance of the convertible was diluted.
They just signed a new lease for a built-to-suit second office campus down the street from there old one. Probably raising money to fund that BS, but at the end of the day the developer (Sand Hill Properties) should be the one shitting a brick.
Tilson...we hardly knew ye...
love this anti-tilson indicator!
one thing troubles me is that Barton Biggs just cut stock exposure in half (after losing his shirt on it). He is another constraint indicator we love to use. So far he has been wrong on every move since the market meltdown started in August. So do I have to go long now?????? This is very annoying!
Barton Biggs actually was saved a little bit of further financial destruction by his own senility on this one.
He sent a telegraph (that's how he rolls) to his 93 year old broker last Friday which read:
Thanks,
B. Biggs
[stop]
That buy order was never placed, obviously, and Barton was relieved to find this out tonight, as he sharted in his depends, grunting loudly while sipping prune juice, before retiring for his post Closing Bell sponge bath with Bertha, his visiting nurse, carrying a copy of his Money Honey Monthly Magazine with him (featuring Michelle Big-Caboosa Cabrera as this months centerfold).
LOL.... again.
Dilution bitchez
So... What's the symbol for this ETF? I think you're on to something here.
SOL
LOL
SOS
How long until he announces he is going short again?
DIY
FCK...wait i think that's the tilson ultra long fund
Goldman Suchs is coming out with an ETF in a few months. The ticker symbole is SHITE. They also have an ETF where U short Europe. Ticker = BROKE.
POS
Tilson has a marketing business on the side with Kasshole- the stock trading just drivs the long tail appearance fees. Who needs performance
Oh Good, Internet Bust Mark II
i missed the 2000 mega fireworks display, got my popcorn for this one
Owww my MoMO hurts!...
Cant make jokes about netflix's downfall, I love the company despite its recent idiocy and it provides me with cheap quality entertainment. Me and the wife will watch deep space nine tonight, and to think that we may not one day be able to fills me with sadness.
sorry...I only junk you cause I thought you were telling the truth
Well, unless the lawyers fuck it all up, you will instead get to chose from multiple providers, each determined to deliver it to you with the best possible service for the lowest price, as that's how the free-market operates.
Did I mention lawyers?
Sounds like a hooker business.
We have NFLX, but I could take it or leave it. The wife is into it more than me. I wouldn't mind saving the $8 a month without it.
Exactly....it is a nice product, but there are so many other options out there and it is a sitting duck as technology rages on.
I can't help wondering what people think who bought a couple of years back and did not sell at the top. They must feel kind of sad and a bit poorer. Merry Christmas.
Agreed the stock is and has been a joke worth watching...for free. However, my 8-year- and 10-year-old know how to watch the kids shows from any room via Netflix. $8 per month...I'll stay a consumer for a while.
Memo to Tilson......SHUT YOUR PIE HOLE!!!
It is worth a few laughs though.
BTFD Whitney
Please hang around long enough to produce the new season of Arrested Development...
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/11/netflix-to-bring-back-arrested-development.html
This is definitely Fight Club .............
http://im.in.com/media/blish/d/photos/2009/May/cat_and_dog_fighting090525043400_515x343.jpg
Whitney's probably got the kids gathered around the kitchen table right about now giving them the old community college sell.
But wait, Netflix just got an EXCLUSIVE deal for a renewed season of Arrested Development. Haha.
cramer says buy buy buy...............
THE YIDS ARE COMING TO GET YOU!
And Dick X Bove says buy bank stocks hand over fist!
This is priceless
Honestly, I think Netflix's biggest problem is the fact they have to deal with all the Hollywood pricks who still think they can charge an arm and a leg for shitty ass entertainment. There's a reason why no one cares enough to make a short drive to the local video store. The content sucks. Netflix helps moderate the crap by not charging per view and by gas savings.
IMO biggest problem is Reed Hastings is an arrogant prick.
thank you...f reed hasings...and all his poor suckers...
MAn-you have a serious axe to gring with this guy! Whats the story?
geez, i dunno....
maybe it was retarded piece in the WSJ that said everyone was rich like him and therefore should pay more taxes....
or maybe it was his fulltard piece demanding that folks buy the stock at $180 a share 11 months and 110 dollars ago.
He is an arrogant prick that has a business model that has already been peter principaled
axe to grind? yup
once upon a time there were real businesses that made real profits off of real business...and then there was reid...
QWERKY huh?!
Can't stop laughing.
Geez, the neighbors are watching.
Oh god, gotta puke...
It seems unfair to single out Whitney Tilson...without mentioning Carter Worth's disasterous call on ANF... with a reiterated $80 price target [when the shares were at $75]...with the shares down almost 40% since reporting.
I think these guys are not getting the updated, insider trading memos...and their calls should be used as contrary indicators until further notice [Carter Worth now calling AMZN a short with huge downside...meaning back up the kids college saving account and get long in a couple days].
Can we drain the swamp yet?
how about the geniuses at JAT Capital (mis) Management? Their biggest holdings (in order) are: Baidu, Priceline, Netflix, Las Vegas Sands, Sina Corp. Electronic Arts, Molycorp.
Yowza - they're having a bad month!
Simple rule of thumb: the WASPier the name, more fade-able the call... seriously who names their sons Carter and/or Whitney?
but carter has all of those really kule charts and shit.............
You guys are so mean to Mr. Tilson. Don't you realize that he is a CNBC contributor and he was featured on 60 minutes? You should give the respect this Wall Street Titan deserves.
Christ, I puked. What more is needed? Yen Cross's first not-born?
bwahahaha
I would love Tilson interviewed by Bob Schieffer....ya know, that guy who asks loaded questions. We would learn so much (sarc off).
Someone really needs to splice together his interview questions of Ron Paul juxtaposed with questions he asks one of the establishment candidates. It would be rather telling.
what? like ron insana?
Ah Ron Insana a true American success story. What was it he said? Oh yeah "Ron Paul doesn't understand financial markets". A pearl of wisdom from one of Wall Street's brightest.
but , but , but .........insana had a successful hedge fund............ sarc off/
Isn't this the same Netflix that Jim Cramer has been promoting for the last year as a Buy Buy Buy?.............................LOL
Didn't Crammer call VRUS? There's the next major short.
Let's get him drunk and tattoo Netflex on his forehead. There's plenty of room for a nice big tat with flames coming out the side, a skull above, and crossed bones below. It should improve his ratings.
i just don't know how to have fun. if only one day, i would just get over my not having bought lehman and bear because of the genii cramer and bove. i'm thinking i'd love to dabble in a little jef and ms and bac right now. think they're cheap??
Netflix is not yet done going down the crapper. Money follows management, and Netflixs' management is horrible, they did not even know why their customers valued Netflix ( cheap price, newer release DVD's by mail with no driving, older releases and good kiddy content with streaming, cheap price...cheap price....you get my point )..Add to the incompetent management all of their off balance sheet debt, and you have a time bomb ready to go off. Wait, it gets better, Blockbuster is getting ready to release their version of unlimited streaming with DVD by mail to the general public after they get done working out its platform which they are doing currently only with Dish subscribers. Netflix is in deep shit. It is too bad, I have their streaming and it is pretty good ( I cancelled the mailed DVD option when they jacked up the price). I started shorting these idiots when they were $120 / share.
Excellent analysis. If I had $ invested w/ Whitless Tilson (Whitney Houston would've been a better advisor!), I'd recommend U replace that dolt.
Very John Paulson of them.
In the second quarter, Netflix bought its stock at an average price of $238 dollars, and it funded this program with bonds that pay 8.5% interest.
Offering $200 million at $70 (they say it will be around $85)
http://seekingalpha.com/article/295242-has-netflix-opened-the-door-to-lawsuits-and-competitors
Pay 8.5% for the privilege of depleting your own capital? That's like awesome squared.
Winnah!
I can't think of another "expert" who has been so wrong about so many things in such a short time, and given some of the muppets out there, that's saying something.
Good thing I bought Groupon too!
"In other news, it may just be time for Tilson to call it a career." - ZH
ZH spares no quarter. I love it!!!
For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals. If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:
eclark@breakaway-partners.com
and I'll add you to the weekly market commentary & portfolio update distribution list. Its free to add you and you can follow along our model and our views. We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt.
wtf?
"I totally agree. Im actually amazed by all the conspiracy theorists out there. Bottom line, GS people(and I know many) are smart, savy, strategic and very forward thinking. I only wish I had the info they have when dealing with client orders. Theyre job is to deliver products their clients want, then they reduce the risk they have as a firm to those positions and hopefully, leverage this knowledge into investments that will benefit the firms shareholders, employeee's, and clients. All this anti-GS talk just wreaks of jealousy from people that don't have enough money to be a GS client. There I said it!"
MDB is that you?
fuu
You shot him with his own ball of shit. You're the man....
Get bent
Get lost
Get fucked
No really
Get lost
Can you get rid of that avatar? Nobody, and I mean nobody, wants or needs to see that shit. WTF?
So pissed my ZSL bid wasn't hit at close. All these sukkers are going down.
Is there any good porn on Netflix? If not, short the hell out of it.
There's too much free porn on the internet now. Why would anyone pay for porn on Netflix?
Here's the deal, IMHO -likely flawed....
Why doesn't Amazon have a service for books where you give them $8 a month and they give you unlimited reading? Because it doesn't work. Authors, like movie producers, like to get paid. That shit costs money.
Hate the quality? News flash. Make it worthwhile to the producers and they will make better movies. Make it a all you can eat buffet for $8 and you will be eating ravioli's that have been in the sauce for 50 years. you know reruns of family guy
....the kobe beef is around the corner for $30. and it is tasty!
The model needs to be $1.50 rental. fitty cents to the distributor (NFLX, AMZN) and a buck to the producer. Or something like that.
NFLX is to Hollywood video as DVD was to VHS...
short to zero or changed model.
There is a very small company that is named after a fruit that has done a good job with this with music....
NFLX is fucking awesome, period! The greedy cocksucking studios who pillage veiwers with "content rights" can fuck off. Most people could give a fuck less about watching the majority of the shit they produce anyways for what the studios want to charge.
Sidenote- You could get almost all content for free if these cocksuckers did not pull some kind of bullshit hocus pocus and force the internet service providers track downloads and deny service to those who download copyrighted material.
Maybe there is a revenue enhancement in there, somewhere....
Gold is never worth ZERO. Netflix on the other hand.........
$5 to dig it out of the ground.....ok, more than NFLX.
But but....Going broke on Netflix shows patriotism! Uncle Warren said so!!
And getting rich on gold is anti-American. Warren said so, but he got rich off political connections. That's patriotic, right?
Apparently if you sign up to Netflix, you get a free copy of Zone Alarm (professional) ~ not sure if that was a region specific offer, or what.
That was yesterday - guess I should have headed the warning bells...
What the hell is Zone Alarm? Sorry, I'm not a Windoze sucker so I don't bother keeping up with the latest Windoze Apps.
It's a crap Windoze port interceptor.
Released in 2000...
That explains it! I switched to Linux with the introduction of Win98.
This snark was derailed into amusing Penguin land.
(The product is #1 freeware Firewall on MS machines - I thought it was a bit ironic, that was all. A firewall to keep the firesale in place)
Deflationary number du jour: 1.5.
DOT reports vehicle miles driven declined 1.5% in September yoy
Moody's reports commercial real esate prices down 1.4% in September (1.3% yoy). Down 42% from 2007 peak.
Had no choice. Had to buy a place for the Wif to live in for her promotion.
Figure on a 20% loss, but if her co last 3 more yrs, it's breakeven.
She gets ins, but that counts as 'residential'.
How far down from 2002? Just asking.
Has Robo coverred yet?
My brother stayed home today...bad headache.
He asked me to send all of you his love.............
Look at the monthly NFLX chart from 2009. Fucking awesome monster truck jump!
Barton Biggs just said that he's still bullish on NFLX because "he believes stores are going to sell a lot of typewriters this Christmas."
???
I'll be very opaque about this for obvious reasons, but sat in a meeting one afternoon with Barton and the equity geeks at my firm. To this day I know not why, since stock jocks never even have caught on that every single fucking financial crisis originates in the money (incluyding bank loan) and bond markets. Period.
Kinda myopic anally retentive folks.
So, supposedly this was out of kindneess or lack of anything better to do that I got asked.
Seriously, I could not have cared less. Sorta like getting a second circumcision.
It was one of the strangest conversations to which I've ever listened.
There were more stock market homilies (that I'd already heard about a 100 times) exchanged whilst arguing over the superiority of value vresus growth stocks.
Fucking waste of bloody time.
Barton was as incoherent then as now. He could speak clearly then, but in terms of critical thought....
i like netflix, i don't want them to fall.
And i don't care what their stock worth as long as they are in business.
Protest about SOPA then - same fucktards who tried to kill off the walkman (copying tapes is THEFT!), CD players (copying CDs is THEFT!), the MP3 player (copying files is THEFT!) and now the internet (all data is THEFT!). The only reason Apple gets such a glowing reputation for the Apple online store is because their competition are dinosaurs. Dinosaurs so on "fire" that they've bleated the death of the industry at every single innovation in the last 20 years, and each time have totally failed to switch business models when a new shift happens until they've missed the boat.
Instead, they rely on lobbying paid shills (who are so old their grandkids are the ones using the new tech) who enact stupidly regressive laws, which enables lawyers and copyright trolls to suffocate creative businesses. Quick, wheel out some ancient rocker, we need 3,000 years on any copyright 'cause we can't make money intelligently!
Because they're the ones screwing netflix royally on royalty costs.
Saw "The Big Lobowski" on Netflix streaming last night> What a scream! Jeff Bridges is classic. # shots before the show and lastfest followed.
Go long Blockbuster stock! lol
Did everyone die? Dam memos....
At least the Putrids are up.
'Deep cuts to the military'
So sick of dicks calling a reduction of increase from 23% to 16% a fukking cut.
Has Netflix ever thought to tell their customer base the obstacles associated with Netflix, such as the reasons they can't give you more significant streaming content (such as movies you would actually watch.), and get their customer base to shame those people/corporations into submission?
Gee, you mean that after going on the quintessential drunken sailor content binge that they ran out of money! T Rowe's good money after bad doesn't change the story. Goose egg within eighteen months!
that's weird enough to make me wonder...
jeeeezus christ
just short the defense stocks....it'll take you two days at most USA USA
we have no leaders...we have no men....short everyting that you belive in .. happy b day