Netflix “is showing investors how not to buy and sell stock,” says the Bespoke Investment Group.
Last night it sold $200 million worth of stock at $70 a share. It had to sell that stock as part of a deal to raise another $200 million in the form of convertible notes. The financial moves will dilute shareholders by about 10%, according to Credit Suisse.
The timing is really embarrassing for Netflix because it spent $200 million buying back shares at an average price of $218 during the first half of the year.
Buying high and selling low is not how you should do it.
For what it’s worth, as you can see in the chart below, Netflix’s timing wasn’t always terrible! It was pretty smart buyer until the second quarter of 2011.