Hybrid Vigor: Vol 4 Issue 2 "It's Now or Never"

This is the year for convertibles. Volatility, higher rates, the whole nine yards. But there’s one deal that absolutely must happen.

If you’ve been following my stuff in various media the last few years, you know I’ve been calling for Netflix to issue the biggest convertible of all time. Yes, I was early—three years early to be exact. Yes, the company has been on target holding off on an equity-linked financing all this time.

But all things come to an end—even if we can’t believe the Falcons’ lead last night was one of them. And now is the time for Netflix, at last, to do the mother of all convertibles.  These shows are great—and expensive. The company is burning cash and will burn even more. The stock is up, oh, nearly tenfold in the last five years.

More notably, even with the blowout subscriber growth in last month’s announcement, the stock really hasn’t made the kind of move you might have expected. A big short-covering burst, and then, kind of meh. Why? Even the bullish analysts think a lot of good is priced in, with a lot of cash burning to come.

Netflix could write its own ticket with a new convertible. But the market’s hunger won’t last forever. New paper is going to start coming. If you want to do a $5 billion deal, now is the time.  Now or never.  The world has never seen an issuer better suited to a huge convertible than Netflix.

You heard it first here.

Disclosure: A principal of Hillside Advisors has a position in Netflix securities.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).