Helios and Matheson Analytics, the holding company for the popular MoviePass subscription service, is in danger of being delisted from the NASDAQ after shares fell 60% today to close at $0.80. This follows desperate moves by the company to stay afloat last week by undergoing a 1-for-250 reverse split and borrowing an emergency $5 million on Thursday after it ran out of money to pay for user’s tickets.
Many MoviePass customers found themselves out of luck last Thursday after the company ran out of money and couldn’t pay for their tickets. Even after the loan, subscribers were unable to buy tickets for last weekend’s box office champ “Mission Impossible: Fallout.”
MoviePass first launched in 2011 but didn’t capture the public’s attention until last year, when Helios and Matheson bought a majority stake and introduced a new pricing model: for less than $10 per month, subscribers could see one movie a day, every day of the month.
Just like that, MoviePass’s subscribers jumped from 20,000 to over a million. As a Big Data company, Helios and Matheson Analytics collects data about its subscribers. Although it doesn’t sell it to third parties for marketing purposes, it knows based on subscriber’s browsing data and moviegoing habits what their preferences are and what actions they wind up taking afterward.
“We can tell if you look at Spiderman and look at Wonder Woman and Mission: Impossible,” says Ted Farnsworth, CEO of Helios and Matheson. “We can tell you exactly what movie you went to out of all three trailers.”
The problem is that MoviePass pays theaters full price for each ticket its subscribers go to see. This business model was unsustainable, and it looks like the end is rapidly approaching.
Although MoviePass in its current format appears doomed, it will leave behind a lasting legacy as a disruptive force in the movie theater business model, as theater chains have started to implement their own competing services.
AMC recently countered with its own monthly subscription service, charging $19.95 per month and limiting subscribers to three movies per week. However, AMC subscribers were offered additional perks, including the ability to see movies in any format and purchasing tickets in advance.
Investors who bought the stock have been in for a rough ride, seeing their initial investment nearly vanish in the last few months (not to mention the ignominy of a reorganization fee that some brokers charge when a stock undergoes a reverse split).
Helio and Matheson stock must close above $1 for 10 straight days and have a market cap of $50 million in order to avoid being delisted from NASDAQ. Subscribers and stockholders are jumping ship and the stock continues its freefall. After the reverse split last Wednesday, the stock traded at $21.25. In less than a week, it was back down below $1.
With all the negativity surrounding the company, it would need to have a true underdog comeback in order for shareholders and subscribers to have any kind of hope for a Hollywood ending.