Helios and Matheson issued shares to raise cash for MoviePass

Mitch Lowe, CEO of
MoviePass, which revealed Monday that it has increased its share
count by more than 9,000% in the last two weeks.
Vivien Killilea/Getty Images for
MoviePass

• MoviePass’s parent company, Helios and Matheson,
  revealed Tuesday that it has increased its share count by
  9,423% in just the last two weeks.
• The massive dilution comes just weeks after the company
  executed a 250-1 reverse stock split to soak up excess shares
  and boost its stock price.
• Helios and Matheson has a history of issuing gobs of
  shares to raise cash to fund its money-losing MoviePass
  service.

Shareholders of the parent company of MoviePass just found out
their stakes are worth about 1% of what they previously thought —
at least in terms of the portion of the company they thought they
owned.

In its quarterly report it filed on Tuesday, Helios and Matheson
revealed that between July 31 and August 13, it increased its
share count by an incredible 9,423%. Its total outstanding shares
went from 6.7 million to 636.9 million over that period.

The company now has more shares in circulation than it did before
it reverse split its stock by a ratio of 250-1 last month.

Between June 30 and August 9, MoviePass’ parent company issued
and sold 232.4 million shares on the public markets, raising
$50.2 million. It also swapped convertible notes it issued in
November and January for another 266 million shares of stock over
that time period, raising some $31.4 million in the process. The
company didn’t reconcile those figures to the total share count
or the increase just since the end of last month.

Ever since Helios and Matheson acquired a majority stake in
MoviePass and instituted its $10-a-month unlimited movie ticket
subscription service, it’s been losing gobs of money. It
blew through $219 million in cash in the second quarter
alone.

Helios has a history of massive dilution

To replenish its coffers, its repeatedly issued new shares. From
August of last year to July this year, for example,
its share count swelled by 3,429%.

All those new shares weighed heavily on its stock. With its
shares trading at less than a $1 a share, Helios and Matheson
received a warning in June from the Nasdaq that its stock didn’t
meet the market’s standards and was in danger of being delisted.

To prop up its stock, the company did its reverse split last
month, temporarily boosting its stock to more than $20 a share.
But within days, the company had resumed its diluting ways.

Near the end of July, the company had to take out an emergency
loan from a creditor to stay in business. It repaid the loan days
later. It did so, apparently, by issuing new shares; from the
time right before to right after the crisis,
its share count increased by nearly 300%.

Helios and Matheson’s share price fell almost in tandem with the
dilution. Within a week of the reverse split, it was again
trading below $1 a share. It closed regular trading Tuesday at 5
cents a share.

With the news of the latest round of extreme dilution, it looks
set to fall even farther. In after-hours trading Tuesday, Helios
and Matheson’s shares were down about 2 cents, or 30%, to 3.6
cents a share.