WeAreDoneHere
SoftBank is willing to chop the leg to save the body as it offered to take the majority stake in WeWork at an $8 billion valuation at the same time when J.P. Morgan is offering the firm a $5 billion junk bond offering. This is a stunning drop from the massive funding round WeWork closed with Softbank at a $47 billion valuation earlier in January. If the firm doesn’t take one of the two life-lines it has in place, it will run out of money by the end of next month.
Here’s how the math works out for SoftBank investors. SoftBank has invested $10 billion and lent out $5 billion more to a company that is valued at $8 billion or less.
For an industry that often claims "you don’t need an MBA to work in the Bay Area", seems to me like they could have surely used one.
Netflix binges on debt
As the competition for content heats up with new players, Netflix is finding itself in rough waters. The firm is planning to sell $2 billion worth of bonds in dollars and euros. The dollar bond sale is a 10.5-year bond sale that may yield 5.125% while euro notes can pay in the 3% range. The firm recently reported earnings that beat analyst expectations and demonstrated overseas growth, and CEO Reed Hastings thinks that the firm is “slowly” becoming free cash flow positive.
Here’s Netflix binging on offerings from the debt capital markets.
We spoke last week about the potential threats that the firm faces in the long-run: market saturation and slowing subscriber growth in the midst of an aggressive competitive landscape. Those possibilities still reign true, and while Netflix will spend capital on content creation, it’s time it takes a deep dive into the kind of content it plans on producing. It has to find a sweet spot in terms of audience, content, and engagement soon before it begins to burn to the ground.
Shorter, cheaper, more amateur content is on YouTube while Disney boasts content for kids and teens. Apple’s content hasn’t been released yet, but I assume it will be closer to what some good Netflix shows are like. But the difference between Apple and Netflix is that one has over $50.5 billion in cash while the other has to raise debt financing.
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