MoviePass Parent Company, Helios and Matheson Analytics, Inc. (NASDAQ: HMNY), has lost 97% of its stock price just during this past week alone. In an unprecedented decline that many argue is unlike anything ever seen before in market history, MoviePass started out with roaring success only to now have year-to-date losses effectively hit 100% as of August 2018.
Management has effectively run MoviePass into the ground after a seemingly very successful period in late 2017/early 2018. Unfortunately, it seems the MoviePass idea was never thoroughly thought out, as the company seems to be in a race with Tesla, Inc. (NASDAQ: TSLA) on how fast they can burn through cash reserves. This comes after Helios and Matheson Analytics just raised $1.2 billion in early July 2018 to “help stay afloat.”
As it seems Helios and Matheson Analytics’ time with MoviePass is coming to a slow and painful end, a student-run venture capital firm out of California sees opportunity and plans to approach the company and its shareholders regarding a takeover. But, before we get into that, let’s review the week of carnage over at Helios and Matheson Analytics:
The week started off on a very sour note, after some MoviePass customers reported that they were unable to use the service to see popular new movies, particularly the new Mission Impossible movie. This caused Helios and Matheson Analytics to see its share price collapse 60% on Monday, July 30, 2018.
Helios and Matheson Analytics announced a price hike for its MoviePass standard plan from $9.95 to $14.95 per month. The new plan also allows moviegoers to see one movie per day with limitations. Here is the bad news: “MoviePass also said first-run movies playing in more than 1,000 theaters won’t be available to subscribers for the first two weeks.” This effectively means that MoviePass subscribers have to wait two weeks to use the service to see major blockbuster movies, such as Mission Impossible.
While shares of Helios and Matheson Analytics initially spiked 150% on the news Tuesday, it would close out the day down another 38%, as investors digest the news and realize it was not very positive.
Things would not get better for MoviePass parent company in the back-half of the week, as the stock lost an additional 54% on Wednesday, followed by another 56% dive on Thursday and a 30% dump to close out the week on Friday. The steep selling later in the week was attributed to the company’s announcement that it took out an emergency loan to help cover losses and keep the movie subscription service live.
According to a filing on Friday from the Securities and Exchange Commission (SEC), Helios and Matheson Analytics borrowed $5 million to help pay merchants and fulfillment processors to ensure that there would be no further service interruptions.
By the time the closing bell rang on Friday, Helios and Matheson Analytics saw its market cap collapse to a paltry $400,000. Serious questions about the company’s future continue to be raised.
Triton Funds, LLC Interested In Potential MoviePass Takeover
In an interesting twist, a La Jolla, California-based, student-run venture capital firm is readying plans to approach Helios shareholders with a proposed takeover plan. The $25 million fund is run by finance students at the University of California at San Diego with a millennial mindset.
Triton Funds, LLC co-founders, Nathan Yee, Sam Yaffa, and Yash Thukral, believe that MoviePass’s only chance for survival is to be taken private, shaking up management team and capitalizing on the most valuable asset – the actual movie subscription model. As of August 2018, MoviePass claims to have over 3 million subscribers.
Triton said they began to approach Helios and Matheson Analytics last week and notes that management initially seemed to be interested in the talks. However, by the time Friday rolled around, management team seemed to have lost interest, despite the epic share price collapse.
The fund managers declined to disclose whether they had any current stakes in the MoviePass parent company. “Now, the fund is planning to “take a page out of Carl Icahn’s book,” said Sam Yaffa. “We are deciding on our final valuation, and then we will reach out to the shareholders of HMNY.”
Overall, it has been a very long week for Helios and Matheson Analytics shareholders, who have seen an unprecedented 97% collapse in share price just in the past five trading days alone. Management continues to rely heavily on expensive borrowing to help keep the MoviePass program alive, which is not a long-term solution. Ultimately, it is not hard to imagine that MoviePass faces a major uphill battle to reach stability. If management does not act fast and find a way to keep the subscription solvent without the need of expensive borrowing, Helios and Matheson Analytics will continue to be on the road to defunct status.
Disclaimer: The author and Spotlight Growth has no 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.