May 24, 2018
NEWS ANALYSIS — The corporate parent of fiscally-challenged subscription ticket service MoviePass reportedly claims it has a $300 million lifeline that can keep operations afloat for at least a year.
Helios and Matheson Analytics (HMNY), which owns more than 90% of MoviePass, has been shrugging off its plunging stock valuation (down 98%) as investors question a business model burning through more than $20 million a month offering subscribers daily access to a theatrical movie for a $9.95 monthly fee (or $6.95 based on an annual fee).
The company, in its most-recent fiscal statement, said it had just $15.5 million in available cash. The news sent the stock freefalling to less than 50 cents per share at the close May 23.
Now, MoviePass president Mitch Lowe and Ted Farnsworth, CEO of HMNY, are telling anyone who will listen that they have access to a $300 million line of credit that can sustain operations for more than a year.
But as Business Insider reports, the line of credit isn’t really a line of credit or much of a lifeline. It’s more of a fiscal Hail Mary.
The credit is known as a “at-the-market” (ATM) sale that enables HMNY to sell shares on a daily, weekly or monthly basis to generate funds without impacting the company’s market valuation.
“It’s kind of a science,” Lowe told Business Insider. “It’s a third party that manages it on behalf of HMNY, but essentially some days they might sell, some days they might not sell. It’s all kind of based on what they believe will have the least impact on the valuation.”
But to make the ATM work requires investors willing to buy shares. And with the stock down nearly 8% at 45 cents per share in early-morning trading May 24, who is going to buy?