MoviePass has less than three months left before it runs out of cash — and its latest changes won't save it

MoviePass has less than two months left before it runs out of cash — and its latest changes won't save it

Things are beginning to look dire at MoviePass.
Hollis Johnson/Business Insider

Enjoy your MoviePass subscription whilst you’ve obtained it. You could not have the ability to use it two months from now.

Helios and Matheson, the mother or father firm of MoviePass, has less than two month’s price of cash left, the corporate revealed Tuesday in its quarterly report.

And that could be overstating issues. It might run out of cash a lot sooner than that if it has overstated the diploma to which new restrictions on the service — together with a brand new three-movies-a-month limitation — will scale back the speed at which it burns by means of cash.

The firm cautioned buyers within the report that its cash is operating low and reissued a beforehand said “going concern” warning. The firm didn’t instantly reply to a request for additional remark.

“Without additional funding, the company will not have sufficient funds to meet its obligations within one year from [Tuesday],” the corporate mentioned in its quarterly report. “These factors raise substantial doubt about the company’s ability to continue as a going concern.”

As of Friday, Helios and Matheson had simply $26 million in cash readily available. It had one other $25.four million on deposit at its service provider financial institution, which processes funds on its behalf.

By distinction, the corporate burned by means of extra than $219 million within the second quarter. That’s a price of about $73 million a month — or almost 50% extra than all of the corporate’s cash and accounts receivable on Friday.

MoviePass has been making changes to save cash

But Helios and Matheson has been making changes to its MoviePass service, which is its solely important enterprise, to preserve cash. Most notably, it plans to limit the number of movies subscribers can see at no further worth to only three a month — down from one a day. MoviePass CEO Mitch Lowe told the Wall Street Journal he anticipated the changes, which take impact Wednesday, to cut back the corporate’s cash burn price by 60%.

Assuming that determine is correct, it would imply that Helios and Matheson is now burning cash at a price of about $29 million a month — or, once more, extra than your complete quantity of cash it had readily available as of Friday.

And that is assuming issues do not get dramatically worse, which once more could also be an enormous assumption. One of the issues Lowe has repeatedly crowed about is the sharp rise within the quantity of MoviePass subscribers and the worth of the info the corporate is amassing from them.

But all of the latest changes to the corporate’s service appear to be taking a toll on its customers. As of Saturday, the corporate had three.2 million subscribers, which was up by simply 200,000 within the six weeks for the reason that finish of June. Between December and the tip of June, MoviePass added 2 million subscribers, or about 333,333 per thirty days.

Helios and Matheson has repeatedly offered shares to lift cash

When the corporate has run low on cash up to now, it has issued new shares to raise funds. And within the report it raised the prospect of doing that once more, noting that it has already filed a regulatory doc indicating its intent to promote as a lot as $1.2 billion price of new shares.

MoviePass CEO Mitch Lowe and Helios and Matheson Chief Executive Ted Farnsworth in happier instances.

In reality, the corporate has already been issuing heaps of new shares to generate cash. Between June 30 and final Friday, the corporate issued and offered 232.four million new shares in the marketplace, elevating some $50.2 million.

But the corporate’s means to maintain repeating that tactic appears doubtful. It’s already in peril of being delisted from the Nasdaq inventory marketplace for having a share worth of less than $1, a transfer that may severely restrict its means to promote new shares.

Last month, Helios and Matheson tried to spice up its inventory worth above that threshold by reverse splitting its inventory, giving buyers one of its new shares for 250 of its previous ones. The transfer labored solely briefly; inside every week, the corporate’s inventory was once more buying and selling at less than $1 a share. On Tuesday, it closed common buying and selling at 5 cents a share, and sunk beneath four cents a share in after-hours buying and selling.

It seems to be set to fall even farther after the corporate revealed within the report simply how a lot it has diluted shareholders in simply the final a number of weeks.

Helios’ share depend has elevated by 9,423% in two weeks

After its reverse inventory cut up, Helios and Matheson had simply 1.7 million excellent. By July 31, it had 6.7 million shares in circulation. However, by Monday it had 636.9 excellent shares. That’s an astounding 9,423% improve to its quantity of shares in less than two weeks.

In after-hours buying and selling Tuesday, shareholders appeared to already be beginning to take the brand new, beforehand unreported dilution into consideration. In latest exchanges, Helios and Matheson’s inventory was down extra than a penny, or about 29%, to four cents a share.

The farther the corporate’s inventory falls the extra shares it should promote to lift further funds. And the extra shares it sells, the less every share will probably fetch on the open market.

For the quarter, Helios and Matheson reported a loss of $63.three million on gross sales of $74.2 million. In the identical interval a 12 months earlier — which was before it took management of MoviePass — the corporate misplaced $5.2 million on $1.1 million in gross sales.

The firm’s cash burn was extra than triple its said loss partially as a result of it acknowledged massive paper good points as a result of discount in some of its liabilities.

All of which is to say that one thing might change quickly — the corporate might get a strategic funding from one other, bigger firm, or it might get acquired wholesale. But with issues being as they’re, MoviePass subscribers ought to, maybe, buckle up for the worst-case situation.

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