MoviePass seeks approval for up to 1-for-500 reverse stock split

MoviePass.Hollis Johnson/Business Insider

• MoviePass’ parent company, Helios and Matheson Analytics, will propose a reverse stock split of up to 1-for-500 to its shareholders in a special meeting next month.
• It’s the latest attempt by the struggling movie-ticket subscription service to not have the HMNY stock be delisted by the Nasdaq in mid-December.

Next month, MoviePass will try its most dramatic step yet to revive its failing stock.

In a filing with the Securities and Exchange Commission on Monday, the movie-ticket subscription service’s parent company, Helios and Matheson Analytics (HMNY), said it would hold a special meeting with stockholders on October 18 to approve an amendment for a one-time reverse stock split of up to 1-for-500 shares.

This follows HMNY’s 1-for-250 reverse stock split in August, which shot the stock up from $0.09 temporarily before it crashed back down again. HMNY stock is currently trading at around $0.02.

In the filing, HMNY said this new stock split could range from 1-for-2 to 1-for-500. But if history is a guide, HMNY will come in at the very upper end of that range. When voting in August, shareholders approved a reverse split range from 1-for-2 to 1-for-250. The next day, HMNY did the reverse split at 1-for-250.

HMNY said in the filing that the reverse split was necessary since the company will have to raise more capital, presumably by continuing to sell stock, which has been its playbook to cover losses this year.

“Although MoviePass recently has implemented significant cost cutting measures which have had an immediate and materially positive effect in reducing the Company’s monthly cash deficit, the Company believes it will continue to need to raise capital to fund MoviePass until MoviePass becomes cash flow positive or profitable (of which there is no assurance),” HMNY said in the filing. 

The bolder 1-for-500 is the latest attempt by HMNY to revive the stock, which if it continues trading below $1 could be delisted from the Nasdaq by mid-December. And as HMNY states in the filing, that would make things even more challenging for the cash-strapped company.

“If the Company is unable to maintain its Nasdaq listing, its access to capital will become further limited and it may not have sufficient capital to enable MoviePass to continue its operations or become cash flow positive or profitable,” HMNY said.

The stock will need to stay at $1 or above for 10 straight trading days for it to no longer be at risk of being delisted, according to Nasdaq. But even that might not a stop a delisting.

“Even if another reverse stock split enables us to regain compliance with the Minimum Bid Price Requirement, the Company may be delisted due to other Nasdaq listing criteria deficiencies, including the failure to maintain the minimum required market value of listed shares equal to at least $35 million and the failure to have at least three independent directors on the audit committee of the Board and a majority of independent directors on the Board,” HMNY said. “Further, the reverse split may not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks.”

HMNY bought MoviePass last August and since has burned through hundreds of millions of dollars to try to make the company a disrupter in the movie-theater business. Currently all it has to show are over three million subscribers, massive losses, and competition in the form of AMC, Cinemark, and Alamo Drafthouse creating ticket subscription service deals for their own customers.