Some stories deserve to be told on the silver screen and live forever in the hallowed halls of cinema. MoviePass parent, Helios & Matheson Analytics Group has one of those stories. And it's a tragedy.
A tragedy so grand and profound that Arthur Miller would have mistaken it for softcore pornography. On July 26th, MoviePass stopped functioning temporarily because Helios & Matheson is more broke than a saltine cracker at the bottom of a backpack
The $5.0 million cash proceeds received from the Demand Note will be used by the Company to pay the Company’s merchant and fulfillment processors. If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc. (“MoviePass”), which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018. Such service interruptions could have a material adverse effect on MoviePass' ability to retain its subscribers. This would have an adverse effect on the Company’s financial position and results of operations.
And investors responded appropriately
The shares fell $3.83, or 56%, to $3 as of about noon New York time.
This news comes days after the company announced a 250-1 reverse stock-split in an attempt to raise share prices, but just like the cash MoviePass received today, this was like putting a duct tape on over a leaking BP Pipeline.
The company pays the full price for every movie that users go to see, and the subscription only costs $9.95 per month, so how does this company make any money?
Easy Answer. They don't.
And they're fine with that. In fact, it's part of the plan.
Because the MoviePass allows subscribers to see up to one film a day in theaters for $9.95 a month while paying theaters full price for each ticket, the company burns $21.7 million a month according to previous SEC filings. On Wednesday, Helios and Matheson was forced to implement a massive reverse stock split that brought shares up to $21 to prevent the company from being delisted from Nasdaq.
"We feel at this point MoviePass is well on its way," Helios and Matheson CEO Ted Farnsworth told TheStreet after the stock split was announced. "We understand the cash burn and the different things that are going on with it but also the positives and how much leverage we have over a movie when we tell subscribers to go see it."
"We're not going anywhere," Farnsworth said. "We're good for the next several years."
On Wednesday, the CEO assured the stockholder's everything was fine and they are going to stick around for a few more years. And they are, as long as your definition of 'fine' is a cash-burning dumpster fire that struggles for investments, and your definition of a 'few more years' is 48 hours.
Despite woes and terrible share price, we should take time to recognize that this is arguably the greatest cash-burning performance of our lifetime. MoviePass make Tesla look like a conservatively run car manufacturer with a tight balance sheet in comparison.
They borrowed $6.2 million and they spend around $21.7 Million a month according to the SEC filings, so it looks like this cash is going to last for.... ummmm ..... hold on, let me make sure my math checks out here .... around 8 and a half days.
Just like nerds packing the theatre to watch Star Wars, financiers everywhere can't look away from this beautiful shitshow.