MoviePass Owner Needs to Raise Capital as It Loses Stock Distribution Deal

Helios and Matheson Analytics seeks second reverse stock split, avoid Nasdaq delisting

Last Updated: October 5, 2018 @ 4:32 PM

Helios and Matheson Analytics Inc., the data company that owns movie-subscription service MoviePass, said in a filing with the Securities and Exchange Commission on Thursday that it received a letter that Canadian bank Canaccord Genuity was terminating its equity distribution agreement.

The agreement allowed Helios and Matteson to offer and sell up to $150 million worth of the company’s shares, which the company does to raise needed capital. Helios and Matheson had sold roughly $126 million worth of stock through its deal with Canaccord as of Sept. 30. The agreement will be effectively terminated on Oct. 11.

In the same filing, Helios and Matheson clarified comments CEO Ted Farnsworth made at TheWrap’s annual media and technology conference TheGrill on Tuesday, during which he said the company had recently acquired $65 million in funding.

At the time, Farnsworth did not specify where or how the money was raised, but the filing states that the capital, which the company raised in August and September, came via sales of Helios and Matheson common stock pursuant to its at-the-market offering under the equity distribution agreement and prepayments by investors of existing investor notes.

Farnsworth also told TheWrap during the event that management at the company hasn’t even consider filing for bankruptcy as a possibility. Industry experts and Wall Street analysts have posited for months that bankruptcy is just where MoviePass is headed.

Helios and Matheson’s stock closed Friday’s trading session at roughly 2 cents per share and has traded below $1 for at least two months. If Helios & Matheson isn’t able to lift the share price above $1 by Dec. 18, the company will be delisted from the Nasdaq exchange.

There’s not a one-to-one causation for delisted companies going bankrupt. But, according to the SEC website, “In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange.”

The Helios and Matheson board of directors voted unanimously last month to adopt a proposal, recommending that shareholders approve a a one-time reverse stock split of the company’s common stock in a ratio of 1 share-for-2 shares up to a ratio of 1 share-for-500 shares.

This would be the second time the company has taken such measures to boost its stock. Shareholders voted in late July to approve a 1-to-250 reverse stock split, which helped boost the stock momentarily, but shares dropped back below $1 a week later.

Helios and Matheson will hold a special meeting of shareholders on Oct. 18 at which shareholders will vote on the stock proposal.