Wall Street is unimpressed with prospects for MoviePass as the stock of parent Helios and Matheson Analytics plunged Wednesday following a reverse stock split. The company instituted a 1-to-250 reverse stock split, reducing the number of shares outstanding from 268 million to about 1.7 million, two days after shareholders approved a one-time reverse stock split. Shares had been trading at well under a dollar in recent weeks but with that split, shares of Helios opened at $14.23 on Wednesday, then declined steadily to close at $10.60 a share. For now, the reverse split will prevent a de-listing by Nasdaq, which had warned Helios and Matheson could occur had the stock continued to trade below $1. The issue was trading above $38 last fall in the wake of launching its subscription service allowing customers to see a movie a day for a monthly fee of $9.99. But Wall Street has been losing faith in whether MoviePass can survive by selling data about its customers and striking marketing partnerships. The issue took a major hit after a May filing with the Securities and Exchange Commission that revealed it had $15.5 million in available cash at the end of April, plus $27.9 million on deposit with merchants while monthly expenses totaled $21.7 million. The subscriber count hit 3 million on June 13, but the stock lost nearly all its value in the wake of AMC’s launch on June 20 of a discount pricing program, allowing customers to see three movies a week for a $19.95 monthly fee. AMC Theatres, the world’s largest exhibitor, has been disparaging the popular subscription service as a house of cards for nearly a year as “unsustainable” because MoviePass pays exhibitors the full price of the tickets that it’s subscribers use.<doc-sep>Helios & Matheson, which owns popular subscription movie-going service MoviePass, is reorganizing its shares in an apparent move to ensure they can stay afloat on the stock exchange. The New York-based data analytics firm’s stock closed down about 13 percent Tuesday at 8.5 cents a share after it announced a reverse stock split of its common shares to boost the cost of a single share. A reverse stock split gives shareholders a single share in exchange for a larger amount of shares. Helios & Matheson said Tuesday that the company will give shareholders one share for each of their existing 250 shares, effective Wednesday. “We believe this is an important step that will facilitate our access to capital over the next several years and enable us to implement our growth plans for MoviePass, MoviePass Films and MoviePass Ventures, and will enable us to pursue potential acquisitions to grow our business,” said Helios & Matheson’s CEO Ted Farnsworth in a statement. Helios & Matheson, which owns 92 percent of MoviePass, decided on the reverse stock split after the company’s shares remained below the $1 mark for several months. If a stock trades below $1 for 30 consecutive days, it is in danger of being delisted, according to Nasdaq rules. Helios & Matheson shares have stayed below $1 since May. Michael Pachter, a research analyst at Wedbush Securities, said the reverse stock split does not reflect whether MoviePass is currently struggling. “It doesn’t mean MoviePass is doing better or worse,” said Pachter. “You can have 100 shares at a penny or one share at a dollar. It doesn’t reflect the value of the company at all.” Helios and Matheson did not immediately respond to questions on its reverse stock split from this news organization. Last year, Helios & Matheson helped jump-start the MoviePass subscription business model, where moviegoers can watch one movie a day in theaters for a monthly price. But since last fall, Helios & Matheson’s shares have plummeted. The company also lost $150 million in 2017, largely due to its acquisition of a majority stake in MoviePass in December, according to an annual report the company filed to the Securities and Exchange Commission through an external auditor in April. The auditor also expressed concerns about the company’s future, saying that MoviePass “may consume all of (Helios & Matheson’s) cash needed for operation” if MoviePass cannot raise new funds. Earlier this month, Helios & Matheson filed with the SEC that it wants to raise up to $1.2 billion in stocks, debt securities and other funding to keep MoviePass operational. MoviePass is also facing new competition as startups and theater chains like AMC have begun providing similar subscription-based plans for moviegoers. Starting this month, MoviePass adopted a surge-pricing model where subscribers will have to pay a few more dollars to see blockbusters on opening weekends and at other popular times. Farnsworth told a specially convened group of shareholders that “theaters don’t like us because we’re too powerful too quick,” and said Monday that the movie-going subscription race is a “full-blown war,” according to Business Insider.<doc-sep>MoviePass' owner, Helios and Matheson Analytics, was trading at about $14 on Wednesday morning after a reverse stock split. If it trades at $1 or above for 10 straight trading days, with a market cap of at least $50 million, the stock will no longer be at risk of being delisted from the Nasdaq. But according to Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business, HMNY's getting the stock above $1 was the easy part — what will be hard is finding new money. At the end of trading on Tuesday, MoviePass' owner, Helios and Matheson Analytics, did a reverse stock split that rocketed its stock price from $0.09 to about $14 on Wednesday morning. Because of its low share price, HMNY had been at risk of getting delisted from the Nasdaq by mid-December if the stock continued to trade below $1. That's why HMNY got approval from its shareholders on Monday to do a 1-for-250 reverse stock split — meaning they got one share for every 250 they held — to try to stave off that fate. If shares of HMNY stay at $1 or above for 10 straight trading days, at a market cap above $50 million, the stock will no longer be at risk of being delisted, according to Nasdaq. If it goes back down below $1, however, it will still be at risk, and it will have become clear that the company's gambit didn't pay off. "I'm not worried," Helios and Matheson CEO Ted Farnsworth recently told Business Insider when asked about the company's finances. "We're taking a company from literally doing $10 million a year to the end of this year we'll be on a run rate of probably $500 [million] to $600 million." However, though HMNY is currently trading above $1, the reality is that it's still a risk in the eyes of most on Wall Street, according to Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business. Before the reverse stock split, HMNY stock was down 99% from its high in October 2017 of more than $38. MoviePass CEO Mitch Lowe and Helios and Matheson CEO Ted Farnsworth. MoviePass/Reuters "You do the reverse split and get over $1, but I don't think that will attract people," Gordon told Business Insider. "I mean, theoretically there could be somebody stupid enough to go, 'Wow, it went from $0.09 to [$14].'" Gordon said the easy part for HMNY was getting the stock above $1 — what will be harder is attracting money. "Their real challenge is how they are going to attract substantial amounts of cash to finance their business model and stay in business," Gordon said. "And that means new cash." And it's going to be hard. Gordon said that because of its financial troubles, HMNY would not be attractive to smart tech money or suddenly appear on Edward Jones' pick list. And at least at the start of trading on Wednesday, it looked as if most of the market didn't have much confidence in HMNY. Based on Tuesday's prices, one share worth $0.09 would be worth $22.50 after the reverse split, but the stock opened soft off the bell. However, Farnsworth is staying optimistic. "Wall Street understands how we operate," he said. "They love the story. They think we're the next unicorn company." Along with the reverse stock split, HMNY shareholders on Monday also approved an increase of the company's common stock to 5 billion from 500 million. "We could have made a conscious decision to slow down. We talked about it for months — 'If we raise the [subscription] price, we'll slow down the growth' — but what Wall Street really wants is to see that growth," Farnsworth said of the growing number of MoviePass subscribers, which he hopes will hit 5 million by the end of the year. "As long as you show that growth story with Wall Street, they will always be behind you." But Gordon isn't so sure about that. "At some point, parts of your story have to start looking true," he said. "For some investors, that's the scariest thing you can hear, 'They love the story.'"<doc-sep>
The reverse stock split was of two measures shareholders of the company approved at a meeting Monday in an effort to prevent the data analytics company from being delisted from the Nasdaq stock exchange. Yet another move made. MoviePass parent Helios and Matheson Analytics Inc. (HMNY) plunged 40.10% Wednesday to $12.73 following a massive reverse stock split that brought its stock price to $21.25 at market open. The company first reported the reverse stock split in an SEC filing Tuesday. The reverse stock split was one of two measures shareholders of the company approved at a meeting Monday in an effort to prevent the data analytics company from being de-listed from the Nasdaq I:IXIC stock exchange. "At this point, I feel like Helios has taken the brunt of the risk along the way and now that we're outside of that and the risk is mitigated substantially from where it was several months ago, that we want to be a benefactor of that," Helios and Matheson CEO Ted Farnsworth told TheStreet. "When MoviePass goes public down the road Helios will end up being the largest shareholder as we are currently." The stock has dropped 99.73% from its peak in October amid concerns that MoviePass' business model is unsustainable. The subscription service allows users to see one movie daily for $9.95 a month but pays theaters full price for each ticket, causing it to burn $21.7 million a month according to SEC filings. Nasdaq notified Helios and Matheson it was in danger of being de-listed in June as it requires that listed companies maintain a share price above $1. Farnsworth also said that the stock split has not reduced investor confidence in the company. Shareholders also voted to increase the number of shares of common stock from 500 million to 5 billion. The reverse stock split is the latest in a series of efforts to bring the parent company back from the grave. Farnsworth told TheStreet earlier this month that the company can generate between $6 to $8 of additional income per subscriber by leveraging its 3 million customer base to provide marketing and analytics to film studios. Helios and Matheson is planning to start offering MoviePass in Europe and "some mergers and acquisitions" by the end of the year, Farnsworth said. "We feel at this point MoviePass is well on its way," Farnsworth said. "We understand the cash burn and the different things that are going on with it but also the positives and how much leverage we have over a movie when we tell subscribers to go see it." "We're not going anywhere," Farnsworth said. "We're good for the next several years."