MoviePass' parent company says the $65 million in new funding it just raised isn't exactly 'new'

Hollis Johnson/Business InsiderMoviePass’ parent company raised $US65 million in funding by selling stock and collecting money due under notes it issued.
  • Helios and Matheson, the owner of MoviePass, raised $US65 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 $US65 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 movies in theatres on the cheap – until recently, it allowed subscribers to see as many as 30 movies a month for just $US10. Because many users saw multiple movies 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 $US65 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 $US65 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, notified the company that it planned to cancel their contract as of October 11, 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.

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