Today, shareholders of Helios and Matheson Analytics Inc (NASDAQ:HMNY) woke up to a nice 15% pop in the value of their shares, after the little-known IT firm announced that it has entered into a securities purchase agreement with institutional investors for HMNY to issue convertible notes in the aggregate principal amount of $100,000,000, for the purpose of further funding MoviePass, and for general corporate purposes.
The Notes will be convertible, at the option of the holders, at a fixed conversion price of $12.06, subject to adjustment.
The investors paid for the Notes with $5 million in cash up front and $95 million in investor notes payable to HMNY (the “Investor Notes”). The Investors are required to prepay approximately $15.65 million of the Investor Notes to HMNY in equal weekly payments over the next seven weeks. The investors may prepay the remaining balance of the Investor Notes, with the resulting cash being paid to HMNY, in their discretion.
The purpose of the financing transaction is to enable HMNY to pay the remaining $5 million balance that HMNY will owe to MoviePass, subject to certain conditions, under a promissory note that HMNY is obligated to give to MoviePass upon the closing of the previously announced Securities Purchase Agreement, dated August 15, 2017, between HMNY and MoviePass (the “MoviePass Purchase Agreement”), and to increase HMNY’s ownership stake in MoviePass by paying MoviePass up to $20 million upon HMNY’s exercise of its additional investment option under the previously announced Investment Option Agreement, dated October 11, 2017, between HMNY and MoviePass, and for any other transaction where HMNY increases its ownership interests or other rights and interests in MoviePass.
In connection with the financing, MoviePass entered into a waiver agreement with HMNY waiving any rights of MoviePass to terminate the MoviePass Purchase Agreement and all conditions to MoviePass’ obligations under the MoviePass Purchase Agreement. The closing of the MoviePass Purchase Agreement remains subject to approval by HMNY’s stockholders. MoviePass also entered into a guaranty with the investors in the financing guarantying HMNY’s obligations under the Notes.
“We couldn’t be happier to fuel MoviePass’ growth to enable its subscribers to consume entertainment where it’s best consumed – at the movie theater,” said Ted Farnsworth, Chairman and CEO of HMNY. “Better performance of films during their theatrical window signals greater success throughout the film ecosystem and that’s our ultimate goal. We take the participation of Canaccord Genuity and its institutional investors as a great vote of confidence in HMNY and MoviePass’ future. With the viral and word-of-mouth-driven subscriber growth MoviePass is experiencing, we believe MoviePass is the future of out-of-home entertainment,” Mr. Farnsworth concluded.
“This latest round of investment will allow MoviePass to continue to deliver on its mission of staying the number one movie theater subscription service in the country,” said Mitch Lowe, CEO of MoviePass. “As demand for our service continues to accelerate among consumers, the early data we are seeing on movie-going behavior can be tremendously valuable to both the studios and theaters. This investment should allow us to further augment our data science capabilities and platform to respond to the needs of studios and exhibitors and their challenges in better understanding their customers,” Mr. Lowe concluded.
On the ratings front, Maxim 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 an upside of 95% from current levels. According to TipRanks.com, Kinstlinger has a yearly average return of 1.8%, a 52% success rate, and is ranked #2021 out of 4703 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.