Helios and Matheson Analytics Inc (NASDAQ:HMNY) announced that, since August 15, 2017, it has received aggregate gross cash proceeds of approximately $12.8 million from the holder of its senior secured convertible notes, thereby satisfying the $10 million financing condition to HMNY’s pending acquisition of a majority stake in MoviePass Inc. (“MoviePass”), which was announced in August 2017. HMNY also announced that it has agreed to increase the purchase price for its stake in MoviePass from $27 million to $28.5 million, which will increase its ownership stake in MoviePass from 53% to 53.71% upon the closing of the transaction. HMNY agreed to make the additional $1.5 million investment in MoviePass for an additional 0.71% ownership stake based on an agreed $210 million pre-money valuation of MoviePass. In conjunction with the additional investment, MoviePass also granted HMNY an option to purchase additional shares of MoviePass common stock for $20 million in cash based on the agreed $210 million pre-money valuation of MoviePass, pursuant to an option agreement, which, if exercised in full, would amount to an additional 8.7% ownership stake in MoviePass as of the date of the option agreement. If HMNY were to exercise the option in full prior to the closing of the transaction, its total ownership stake in MoviePass would be 62.41% as of the date of the option agreement.
In connection with increasing its investment commitment to MoviePass, HMNY provided $6.5 million in cash to MoviePass on October 6, 2017, consisting of an advance payment of $5 million that would have otherwise been due within 90 days after closing the acquisition transaction with MoviePass plus the additional $1.5 million investment amount, for which HMNY received an amended and restated convertible promissory note of MoviePass in the amount of $11.5 million, which superseded and replaced the $5 million convertible promissory note issued by MoviePass to HMNY on August 18, 2017.
HMNY agreed to increase its MoviePass investment commitment and acquired the additional MoviePass investment option after evaluating the significant and rapid increase in the number of MoviePass subscribers since MoviePass announced its new $9.95 per month subscription fee on August 15, 2017 and the public’s interest in the MoviePass monthly movie theater subscription service.
“I believe we are witnessing a major disruption in the movie industry,” said Ted Farnsworth, Chairman and CEO of HMNY. “The marketplace has responded, and we could not be more thrilled with the new subscriber results of MoviePass.”
“There is much that MoviePass needs to do to make the customer experience enjoyable and seamless,” said MoviePass CEO Mitch Lowe. “We have scaled our operations beyond expectation and with further investment from Helios and Matheson, we believe we can scale even further. We are focused on innovating the movie theater experience so that movie-goers, exhibitors, and the entire industry can thrive beyond its current challenges. We are aiming to create a new era of movie-going where independent films and blockbusters alike can enjoy large and eager audiences in every theater, especially for entertainment consumers who value subscription. This is not innovation for innovation sake, we want to bring the film industry into a new golden age.”
MoviePass, established in 2011, and now led by Netflix co-founding senior executive Mitch Lowe, offers subscribers the ability to purchase up to one movie ticket a day at most U.S. movie theaters with no blackout days. Concurrent with the announcement of HMNY’s transaction with MoviePass in August 2017, MoviePass lowered its monthly subscription fee to $9.95, propelling a widespread and dramatic national interest in the service and increased attendance to movie theater exhibitors.
Shares of Helios & Matheson are currently trading at $27.94, down $4.96 or -15.06%. HMNY has a 1-year high of $38.86 and a 1-year low of $2.20. The stock’s 50-day moving average is $7.96 and its 200-day moving average is $3.99.
On the ratings front, Maxim Group analyst Brian Kinstlinger assigned a Buy rating on HMNY, with a price target of $20, in a report issued on October 2. The current price target implies a downside of 28% from current levels. According to TipRanks.com, Kinstlinger has a yearly average return of 7.3%, a 58% success rate, and is ranked #851 out of 4694 analysts.
Helios & Matheson Analytics provides information technology consulting, training services, software products and enhanced suite of services of predictive analytics. Its solutions cover the entire spectrum of IT needs, including applications, data, and infrastructure.