MoviePass Parent to Raise $164 Million Amid Cash Crunch

MoviePass App - H - 2018

The company will burn through at least $45 million this month and could require $1.2 billion more to keep it afloat and growing.

Things might be worse at MoviePass than even its detractors knew.

The service that gives subscribers a ticket per day for just $10 a month ran a $40 million deficit in May and will run "at least" one of $45 million this month, while it has less than $49 million in cash and money owed to it by merchants, according to an SEC filing on Thursday.

The company's parent, data firm Helios and Matheson Analytics, is addressing its cash crunch by raising $164 million via bonds and preferred stock, but to keep MoviePass afloat and growing, it might require spending more than $1.2 billion.

"To become a profitable company and achieve the economy of scale in the movie industry that we are expecting, we will require a significant amount of additional capital," Helios and Matheson said in its filing. The money would be used for MoviePass as well its investment arm, MoviePass Ventures, its production company, MoviePass Films, and recent acquisition Moviefone.

Helios and Matheson also said it might seek further acquisitions in the movie industry. It says MoviePass requires so much cash because it is a "hyper-growth" company, having added 3 million subscribers since Aug. 15, when it slashed its fees to just $10. Prior to that, it had been at $30, $50 and various other prices.

While consumers appear to love the service, it's nevertheless a precarious time for MoviePass. Stock of its parent has sunk from $10 to just 33 cents this year, and Helios and Matheson is considering a reverse stock split to boost the price past $1 before Nasdaq delists it.

Also, AMC, the nation's biggest movie exhibitor, announced on Wednesday the creation of its own subscription service for $20 a month for three tickets weekly, but it allows for reserved seating plus Imax and 3D showings while MoviePass does not. On Thursday, Wedbush analyst Michael Pachter called AMC's offering "another nail in the MoviePass coffin."

On the plus side, MoviePass said that the usage rate among its subscribers "has been declining significantly," as has its cost per ticket. It also has cut down on illicit use of its service — like users selling their tickets — through technological advances and the implementation of new rules, such as restricting the number of times subscribers can see the same film. 

In fact, Helios and Matheson said in its filing that MoviePass could become cash-flow positive in the first half of next year.

"To maintain our growth and continue to fundamentally transform the movie industry, we will continue to require significant proceeds from sales of our debt or equity securities, including common stock," Helios and Matheson said on Thursday.

From May 9 to June 15, it issued 100.8 million shares for $54.8 million.

Meanwhile, MoviePass CEO Mitch Lowe told Business Insider on Thursday that subscribers can expect about a $2 surcharge on the most popular titles beginning as soon as next month.