George Schneider

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Helios & Matheson (HMNY) Headed for the Cutting Room Floor?


The majority owner of MoviePass, Helios and Matheson (NASDAQ:HMNY) has suffered  yet another blow to its plan to rise from the ashes and save itself from certain corporate death.

After having just effected a 1:250 reverse split just recently to raise its stock price above $1.00 and keep the company from delisting by  Nasdaq, the stock rose from just $.085 to $21.25.

From there, it’s been all downhill, once again for the company’s stock. MoviePass suffered an outage last week. None of its over 3 million subscribers could use their app to see a movie.

Helios then borrowed over $6 million from Hudson Bay at near usurious terms, paying near 24% interest for the use of funds for just days. Half of the loan must be repaid by August 1 and the remainder by August 5. The company had run out of funds and needed to pay a tech support vendor to fix the app for them.

On Sunday, July 29th, a second outage occurred and social media was abuzz that no one could see Tom Cruise’s new flic, “Mission Impossible: Fallout”.

For those that weren’t able to see the new pic, here’s one that shows the damage being done to HMNY’s stock price in the wake of these debacles.

As this is written, HMNY’s stock price has again slid below $1.00 per share, to just $.539, and will most probably receive a de-listing warning notice from Nasdaq once again if the stock price remains below that buck. Having lost  50% or more of its value each day since the reverse split, it doesn’t look like a return to that $.085 per share price is far off, again.

The only way out of this, at this point, is for the company to quickly sell more shares to raise enough capital to stay in business and have enough cash to continue paying theaters the full movie ticket price to its participating theaters.

Doing so, however, will only further dilute existing shareholders who are already on the way toward zero in their market value. As the market cap of HMNY continues to slip, now towards just $1.4 million, the task of convincing saviors to step in and keep the company operating become slimmer by the second.

As per Business Wire:

“On July 31, MoviePass announced the implementation of several new measures aimed at accelerating the plan for profitability. Through these new steps, the company believes it will be able to compress its timeline to reach profitability.

Today, the company has implemented several elements of a long-term growth plan to protect the existing community and set it up for future sustainable growth.

MoviePass has implemented several new cost-reduction and subscription revenue increase measures:

  • Actions that have been implemented are currently cutting the monthly burn by 60%.
  • A future increase of the standard pricing plan to $14.95 per month within the next 30 days.
  • First Run Movies opening on 1,000+ Screens to be limited in their availability during the first two weeks, unless made available on a promotional basis,
  • Implementation of additional tactics to prevent abuse of the MoviePass service.

As of Q3 and beyond, MoviePass is also generating incremental non-subscription revenue of approximately $4 to $6 per subscriber per quarter.”

source: Business Wire

At the lower end of incremental revenue per subscriber, this should bring the company $12 million in revenue per quarter.

Many of the new features the company is implementing won’t go down well with current subscribers. A 50% increase in subscription cost will not be welcome, nor will limiting availability to first-run movies, making subscribers wait two weeks until they can see many movies. It remains to be seen how many subscribers MoviePass will lose to these new restrictions and cost increases and how well the company will be able to offset these subscriber losses with growth of new subscribers going forward.

Buyers of HMNY stock, beware.

 

Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

 

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