Sidenote: I am broadly of the opinion that SaaS companies are very poorly treated by the debt market relative to the intrinsic properties of their operations, which should make them *extremely* attractive credit risks.
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Would Netflix need to got to zero stock price for them to default on their bonds?
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Essentially yes; bondholders sit above equity in the stack at bankruptcy liquidation.
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I thought the same thing as I read this today; I glazed over at his first “Netflix Theory” post but the hedging thing struck me as a really great illustrative example.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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Hmmm... discovered on Case where this would fall on it's face: If
@netflix stock slowly decreased in value over 10 years, let's say dropping 20%/year every year. It would get increasingly expensive to to buy an Option (so you could short it) every 3 years as it approaches $0.Thanks. Twitter will use this to make your timeline better. UndoUndo
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