UK IPO hopeful in pole position in streamer race

Tuesday might be a day to spare a thought for any investor long Netflix as Disney launches is streaming service, Disney +. But the flotation of UK visual effects firm DNEG might just give them a way to profit from the coming war between the big streamers.

  • By Sam Kerr
  • 12 Nov 2019
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Netflix’s most pressing concern will be that it seems close to peak penetration in its most profitable streaming marketplace, the US.

The company added 520,000 US subscribers in the third quarter rebounding from a subscriber loss in the second three months of the year, but below analyst estimates.

The news that the company had lost US subscribers in the second quarter, the first time since 2011, caused its shares to fall. Netflix’s shares are still around 20% below where they were before second quarter results were revealed.

In contrast, it added 6.26m international subscribers in the third quarter, but its results show that it has to market far more internationally in order to gain customers than it does in the US, meaning the segment remains less profitable than its domestic market.

The company still has an astronomical stock price that trades at 94 times earnings, largely dependent on a belief in its future profitability and growth. But as competition grows Netflix could either lose subscribers or have to spend far more on marketing and content to retain them.

Disney has entered what is already a hugely competitive US market where Amazon Prime, Hulu, HBO and Apple + all compete with Netflix for subscribers. Disney will begin international expansion next year.

US households in particular will inevitably have to make a choice on whether they can continue to afford so many subscription services and Disney’s vast library of original content, brand recognition and intellectual property rights to franchises such as Marvel and Star Wars, are a serious challenge to Netflix.

If TV lovers are wondering where to allocate their money, then what of investors in the sector? At least viewers are guaranteed some entertainment and maybe some laughs no matter which service they pick. Investors must be anticipating screens full of red and possibly some big explosions.

However, the IPO of UK visual effects company DNEG presents a way for investors to back the streaming war itself, rather than the participants. Love the game, not the i-players.

DNEG produces visual effects for film and television and its clients include studios such as 20th Century Fox, Legendary Entertainment and Disney.

It also works closely with streaming services like Netflix, Amazon and Hulu, all of which are fighting to win market share through the production of original content.

In the war for viewers, DNEG is a company that will provide ammunition for all sides and it is a certainty that shots will be fired.

The DNEG IPO is not yet covered and if it does list it won’t be huge — around £215m if the full greenshoe is allocated.

But it is an opportunity for investors to profit from the impending conflict between the streamers, rather than worrying if they have backed the wrong horse.



  • By Sam Kerr
  • 12 Nov 2019

All International Bonds

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1 JPMorgan 382.99 1786 8.33%
2 Citi 353.50 1528 7.69%
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4 Barclays 274.06 1154 5.96%
5 HSBC 225.93 1250 4.91%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
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1 BNP Paribas 56.98 239 8.29%
2 Credit Agricole CIB 44.23 210 6.44%
3 JPMorgan 35.49 105 5.16%
4 SG Corporate & Investment Banking 30.79 154 4.48%
5 UniCredit 30.33 166 4.41%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
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1 JPMorgan 13.16 82 8.24%
2 Goldman Sachs 12.81 65 8.02%
3 Morgan Stanley 12.18 55 7.62%
4 Citi 10.09 71 6.31%
5 Credit Suisse 6.93 38 4.34%