Disruptive technologies, serial entrepreneurs, mega billionaires: these are all terms we have grown quite familiar with in the last decade. Names like Bezos and Zuckerberg are the rock stars of the 21st century.
And then there is Richard Farnsworth. Who is he? The CEO and driving force behind Helios and Matheson Analytics, Inc. (OTC Pink: HMNY). And what is HMNY all about? It all started with Red Zone mapping apps. According to SEC filings, Richard came up with the idea while on a trip to Israel. What made Red Zone unique was its ability to direct travelers away from dangerous routes and areas.
Red Zone was never the most downloaded app in the mapping space. There are two guys named Google and Apple that had that covered. Nevertheless, it is a space that Richard Farnsworth should have stayed.
Instead back in 2013 he raised $55 million in cash and other assets to acquire a controlling interest in MoviePass. This totally changed the business of Helios and Matheson Analytics. Unfortunately, it turned HMNY into a hopeless money pit.
HMNY & MoviePass: Strategic Weakness From The Start
The success of streaming movie services such as Netflix, Inc. (NASDAQ; NFLX) and Amazon.com, Inc. (NASDAQ: AMZN) have naturally siphoned attendances from traditional movie theaters. It has also disrupted once iconic service brands such as Moviefone, Fandango and others.
MoviePass is simply another player in this game. The consumer appeal was simple. For a subscription fee, members could access most any movie in any theater in America.
MoviePass was very popular with consumers. Before its acquisition by HMNY, MoviePass boasted of 3 million members. But making a profit? That’s an entirely different issue. Before being acquired, MoviePass experimented with various pricing plans ranging from around $10 per month to as much as $24. Nothing seemed to stick.
By 2013, it was easy to see why HMNY offered MoviePass founders a bailout. There was one factor Farnsworth failed to consider: AMC Entertainment Holdings, Inc. (NYSE: AMC) with its more than 10,000 screens worldwide.
AMC is firmly entrenched in guest loyalty programs. The key difference is that AMC Stubs program offers discounts on concession items like sodas, popcorn and candy. It also provided express customer access at concession counters.
MoviePass: The Money Pit
HMNY is a deeply depressed stock that has seen so many reverse splits that its “all time high” on a split-basis is over $6,000 back in last 2017. As of June 2019, HMNY trades for $0.0027. Will they survive or go bankrupt?
Consider this: over the three years for which the company has released financials, HMNY has lost over $300 million, while producing less than $10 million in MoviePass revenues. Over the past year alone, Mr. Farnsworth has raised millions through deeply discounted equity offerings that angered shareholders and helped depressed the price of HMNY stock further.
In April 2018, HMNY announced the sale of up to $150 million in a secondary stock offering. This helped dramatically increase the share count. In a Business Insider article dated October 3, 2018, it was disclosed that HMNY raised $65 million in new funding during the month of September 2018. More recently, HMNY raised $6 million in new funding in March 2019 through the sale of 60,000 new shares of Series B preferred stock. Here is the kicker…. the preferred shares are “convertible to 1,000,020,000 shares of its common stock,” according to another Business Insider article. This doesn’t account for the warrants that were also issued.
A further stock offering is now impossible given the stock price is less the $0.05. After being delisted from the NASDAQ in February 2019, HMNY is now on the OTC Pink Sheets and even has a “stop sign” for delinquent SEC filings and disclosures. Oh yes, there is one other thing. Last October, the New York Attorney General opened an investigation to see if Richard Farnsworth had misled investors about the company’s financial condition. What more needs to be said: Game, Set, Match for Helios and Matheson Analytics.
Article By: James Waggoner
Disclaimer: James Waggoner, Matt Rego and Spotlight Growth have no long or short positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.