Moviepass Runs out of Cash
"What comes up must come down." It appears that the most economic-friendly entertainment service Moviepass is approaching its end... again. The company that is revolutionizing the theater industry is on its ropes as its cash pile is rapidly being depleted.
In recent months, Moviepass has attained stunning popularity due to its alluring subscription service that allows users to watch a movie per day in theaters for just $10 a month. In most areas, watching one movie in a month will give more than the subscription's worth since the average ticket price in many places range from $11 to $13. This business model has persistently placed Moviepass's parent company Helios and Matheson Analytics in escalating debt as it funds the full price when purchasing the tickets from merchants and vendors such as AMC and Cinemark.
On July 26, the company suffered from a service outage, in which users couldn't use their subscription cards to purchase their tickets. This occurred since the parent company ran out of money and was unable to pay its merchants for the tickets, as reported in a Securities and Exchange Commission (SEC) filing. Additionally, the filing stated, "If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc... which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018." As a result, the company desperately had to borrow $5 million in cash to pay its processors from Hudson Bay, but at a huge cost in which half of the loan should be paid by August 1. For a company that is consistently bleeding money, that seems practically impossible, or it will have to borrow from another lender. And the cycle will continue. There seems to be no clear road without any hurdles for Moviepass.
This service outage just adds to the numerous crises that Moviepass is already undergoing. Recently, its parent company desperately underwent a 1-for-250 reverse stock split, pushing the stock price to around $24 as its former price below $1 would risk its stock HMNY being delisted from the Nasdaq. However, this short-term change was no resolution as the company's shares consequently have dropped over 80% since then, and as of July 27, they were valued at $2. Investors are primarily concerned regarding Moviepass's long-term sustainability as they still doubt how the company will turn a profit and find solutions to its ever-increasing debt pile. In fact, the company burns $21 million per month on average. If Moviepass continues this aggressive spending tactic, its too-good-to-be-true service may cease to exist before the year ends.
What is your opinion? Do you think the company will survive, or be one of those ambitious startups that only die with their vision? Comment your answer below.
For more information about Moviepass, its plans for success, and its debt crisis, check out the video below.
Related articles:
In recent months, Moviepass has attained stunning popularity due to its alluring subscription service that allows users to watch a movie per day in theaters for just $10 a month. In most areas, watching one movie in a month will give more than the subscription's worth since the average ticket price in many places range from $11 to $13. This business model has persistently placed Moviepass's parent company Helios and Matheson Analytics in escalating debt as it funds the full price when purchasing the tickets from merchants and vendors such as AMC and Cinemark.
On July 26, the company suffered from a service outage, in which users couldn't use their subscription cards to purchase their tickets. This occurred since the parent company ran out of money and was unable to pay its merchants for the tickets, as reported in a Securities and Exchange Commission (SEC) filing. Additionally, the filing stated, "If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc... which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018." As a result, the company desperately had to borrow $5 million in cash to pay its processors from Hudson Bay, but at a huge cost in which half of the loan should be paid by August 1. For a company that is consistently bleeding money, that seems practically impossible, or it will have to borrow from another lender. And the cycle will continue. There seems to be no clear road without any hurdles for Moviepass.
This service outage just adds to the numerous crises that Moviepass is already undergoing. Recently, its parent company desperately underwent a 1-for-250 reverse stock split, pushing the stock price to around $24 as its former price below $1 would risk its stock HMNY being delisted from the Nasdaq. However, this short-term change was no resolution as the company's shares consequently have dropped over 80% since then, and as of July 27, they were valued at $2. Investors are primarily concerned regarding Moviepass's long-term sustainability as they still doubt how the company will turn a profit and find solutions to its ever-increasing debt pile. In fact, the company burns $21 million per month on average. If Moviepass continues this aggressive spending tactic, its too-good-to-be-true service may cease to exist before the year ends.
What is your opinion? Do you think the company will survive, or be one of those ambitious startups that only die with their vision? Comment your answer below.
For more information about Moviepass, its plans for success, and its debt crisis, check out the video below.
Related articles:
- The Better Deal: MoviePass vs. AMC Stubs A-List
- The Dramatic Fall of MoviePass: Debt and AMC Stubs A-List
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