"Boss, I met with Mr. Hastings, the CEO of Netflix today. He said that Netflix is open to financing, but not now, at least not at their current stock price..."
Following Barron's previous instructions, Daisy went to America to meet with Netflix CEO Hastings.
At this time, DS Capital holds nearly 8.62% of Netflix's shares, and it can be said that it has become one of the company's major shareholders.
From Daisy's call, Baron learned that Hastings also hoped that Netflix could raise funds at this time to better cope with the current Internet winter, but he did not want to issue additional shares at the current price of less than US$6.
In Hastings' view, Netflix's stock price is completely undervalued and has been affected by the sharp decline in Nasdaq technology stocks in the third quarter of this year.
Therefore, if DS Capital wants to invest in Netflix, it must either wait until its stock price returns to a price that Hastings considers reasonable, or accept Netflix's additional shares at a reasonable price.
Daisy called to ask what Barron's decision was in this situation.
So since Netflix's stock price is currently low, why doesn't DS Capital buy Netflix's outstanding shares directly on the stock market?
Of course, there is a reason for this.
When Netflix first went public, the stock was priced at $15 and its market value was $450 million.
But now its stock price has fallen below $5, reaching an all-time low of $4.83, and even now, after DS Capital bought a large amount of Netflix shares, its stock price has just exceeded $6 - and then fell slightly.
The problem is that Netflix only has so many shares outstanding, and anyone who was willing to sell their stock had already sold it - most of which was acquired by DS Capital.
There are not many Netflix shares in the secondary market now. In this case, if DS Capital buys a little more, its stock price will immediately be pushed up very high.
If you want to hold more shares of Netflix, you can only do so by directly investing in the company and acquiring its private placement shares.
Daisy also mentioned that when DS Capital increased its holdings in Netflix shares, it had already alarmed Netflix because it had reached a 5% shareholding ratio.
Although they said at the time that it was just a financial investment and they had no intention of acquiring Netflix.
But if Hastings continues to increase his Netflix shares now, he will also be worried that DS Capital has more ambitions.
Under such circumstances, if you want Hastings to agree to issue more shares to DS Capital, you need to reassure him that it is nothing more than giving up the voting rights of the shares held, which is just a pure financial investment.
In addition, we need to consider what Hastings said, "give him a reasonable price"!
"Promise him, Daisy."
Barron's decision did not surprise Daisy. Before she came to the United States, the two had discussed this strategy for Netflix.
"So what price do we give them?"
"You told Mr. Hastings that I could accept their private placement at $10 per share. Now you need to know how much money he wants."
"10 dollars, this is a huge increase compared to Netflix's current stock price of around 6 dollars!"
Facing Daisy's question, Barron said calmly:
"That's not the point, Daisy. We are investing in them for the long term. I am optimistic about Netflix."
Anyway, Baron knows that by the end of this month, Netflix's stock will rise back to over $10.
At that time, at this price, you probably still won't be able to buy many Netflix shares, so it's better to get shares directly from their private placement.
After Barron made the decision, Daisy discussed with Hastings again and finally decided:
DS Capital will invest $21 million in Netflix and acquire 2.1 million shares of Netflix stock at a price of $10 per share through a private placement.
After the capital injection, DS Capital will hold a total of 4.686 million shares of Netflix, accounting for 14.6% of the company's total share capital.
It can be said that Daisy's main purpose of traveling to America this time has been achieved, but the other purpose was rejected.
Barron had originally asked her to ask Google if they needed financing, but she was rejected without hesitation, and she didn't even get to meet their founder…
Barron had anticipated this, but it can only be said that he acted too late.
Google was founded in 1998 and initially received only $100,000 in private investment.
The following year, on June 7, 1999, Google completed a new round of financing. It can be said that this round of financing set a record - not in terms of how high the amount of financing was, but in terms of the $25 million in financing they received from KPCB and Sequoia Capital, the two most famous venture capital firms in Silicon Valley at the time.
These two top VC firms have been competing fiercely and have never invested in a company at the same time before, which shows how important Google is in their eyes.
In the original time and space, this was also the only round of financing for Google before its listing. Under the protection of these two top VC companies, Google was successfully listed in 2004 and began its history as an Internet giant.
…
Of course, even in Britain, DS Capital was not very famous at that time, let alone in America, across the ocean, being rejected by Google was not a surprising thing.
As the saying goes, one loses something in one place but gains something in another. Although the idea of investing in Google is not feasible for the time being, Amber brought good news to China, that is, Mr. Li, the boss of Baidu, agreed to their investment.
Previously, Baidu had only raised funds twice when it was founded, in February and September 2000, with financing amounts of US$1.2 million and US$10 million respectively.
In the financing in September 2000, DFJ and IDG investment companies purchased 9.6 million shares of Series B convertible preferred stock at US$1.04 per share.
This time, DS Capital directly increased its price by nearly three times, deciding to purchase 5 million shares of its convertible preferred stock at a price of US$3 per share, investing a total of US$15 million in Baidu.
According to the agreement, when Baidu goes public, the convertible preferred shares held by DS Capital can be exchanged for Baidu's common shares at a 1:1 ratio.
This is what makes Boss Li different from the other two in BAT. Before his company went public, he only raised funds through convertible preferred shares, so that investors could not shake his control over the company.
After going public, Baidu will definitely implement AB shares, with Class B shares having more voting rights, and Boss Li will still be able to firmly hold control of the company.
Baron was very satisfied with the result. He knew that when Baidu went public in the United States in the future, the stock issue price would be US$27.
However, on the opening day, Baidu's stock opened at a high price of US$66, and its closing price that day was as high as US$122.54!
The preferred shares purchased by DS Capital at US$3 per share can be exchanged for common shares at a 1:1 ratio in the future - an increase of more than 40 times, which is quite satisfactory.
However, the investment in Baidu will also be a long-term investment, because Baron knows that after Google withdrew from the Chinese market, Baidu's stock price once skyrocketed to nearly US$700 per share. At that time, it was the best time to reduce its holdings.