MoviePass parent Helios and Matheson says $65 million raise isn’t exactly “new”

MoviePass’ parent company
raised $65 million in funding by selling stock and collecting
money due under notes it issued.
Hollis Johnson/Business Insider

• Helios and Matheson, the owner of MoviePass, raised $65
  million in funding in August and September, the company disclosed
  on Thursday in a regulatory document.
• But unlike company CEO Ted Farnsworth’s assertion, the
  funding wasn’t exactly “new.”
• Part of it came from debt agreements the company struck
  months ago. 
• The other part came from selling shares it had already
  disclosed that it had issued.

The parent company of MoviePass, it turns out, hasn’t exactly
raised $65 million in “new” funds.

CEO Ted Farnsworth said Tuesday that Helios and Matheson
had garnered new funding last month. But the company made
clear Thursday his original statement wasn’t completely accurate.

The funds were raised between August and September and came in
part from notes it issued months earlier, the company, which
acquired MoviePass last year, said in a regulatory document filed
with the Securities and Exchange Commission. The rest of the
funding came from selling additional shares of stock, something
it had already indicated it had done in a regulatory filing last
week.

“The company wishes to clarify certain information contained in
news reports regarding recent funding received by the company,”
Helios and Matheson said in the new filing, explaining why it
spelled out the source of the new funds.

The MoviePass owner’s stock was crushed following the filing,
falling 1.5 cents, or 42%, to 2.1 cents a share. The stock had
quadrupled to 4 cents a share the previous day on news of the
alleged new funding.

MoviePass offers a subscription service that allows users to see
films in theaters on the cheap — until recently, it allowed
subscribers to see as many as 30 films a month for just $10.
Because many users saw multiple films each month, the company
has lost hundreds of millions of dollars, forcing it to
continually raise new funds — and putting it in danger of
bankruptcy.

The company may no longer sell shares on the open market

Some of the $65 million came from money raised under debt
agreements it struck in November and January, the company said in
the new filing. Those agreements called for the company to issue
notes that could be converted into stock in exchange for cash. It
didn’t immediately take possession of all the cash it was
entitled to under either agreement.

The other part of the $65 million came from selling shares in
August and September, Helios and Matheson said Thursday. The
company disclosed last week that it had more than doubled its
share count between August 14 and September 14, although it
hadn’t said previously what it had done with those new shares.

The company
has increased its share count by more than 80,000% since
it completed a reverse split of its stock at the end of July,
largely by selling its shares on the open market. But that tactic
may be coming to an end. Canaccord Genuity, the investment bank
that was helping Helios and Matheson sell its shares on the open
market, cancelled its contract with the company on Tuesday,
according to the regulatory document.

“As a result of the termination of the [agreement], no further
offers or sales of the company’s common stock will be made
pursuant to the company’s at-the-market offering,” Helios and
Matheson said in the filing.

A Canaccord representative did not respond to an email seeking
comment.