'It is a full blown war going on': The CEO of MoviePass’ parent company wants to use its subscribers as an army against traditional theatres

Business Insider

MoviePass’ war against traditional movie theatres is still in its infancy, the chief executive of its parent company, Helios & Matheson, told a specially-convened group of roughly 30 shareholders on Monday.

From the 67th floor of New York’s iconic Empire State Building, CEO Ted Farnsworth declared to a packed conference room of investors that MoviePass, the subscription service of which his company owns a 92% stake, plans to use its enthusiastic subscriber base as an infantry in its fight against major Hollywood theatre chains.

“Make no bones about it, it is a full blow war going on, especially with AMC,” Farnsworth told the room of investors, who were largely optimistic, despite shares plunging more than 99% from their October highs.

“The theatres don’t like us because we’re too powerful too quick,” he said. “We know with all the independent research that’s out there, if we ask somebody to go to a Regal instead of an AMC, 50% of the time they will go to Regal. They realise that at the end of the day we’re gaining all this power with the consumer base. That was always the play, having leverage over the theatres.”

Still, MoviePass and its owner HMNY have a long way to go before they can declare victory. Last month, the company received notice from Nasdaq that it would be delisted if it fails to maintain a stock price above $US1 and a minimum market cap of $US50 million, per the stock exchange’s requirements.

Shortly after, it called the special meeting with two proposals designed to help its struggling shares.

Stockholders approved both measures at the meeting on Monday. The first allows the company to issue 4.5 billion new shares of stock, increasing the total number of shares outstanding to 5 billion from 500 million. The second gives the company the ability to perform a so-called reverse stock split. Management can now increase the stock’s price by consolidating shares by a ratio of between 2-for-1 to 250-for-1, at its discretion. Executives did not say when or by how much they would utilise each of their new options.

Despite the approvals, some investors weren’t happy with the company’s response to the stock’s drastic fall from a high of $US38.52 last year.

“As the stock price has plummeted, I’ve been concerned about the lack of communication from the company explaining what’s going on or assuring investors,” one shareholder told Farnsworth and other executives. “There’s never been any sort of formal communication to the shareholders explaining what you think is going on, what the problem is with the stock going down so much, and what steps you’re going to take to fight that battle.”

Other investors voiced concerns that their holdings would only be diluted further by the potential stock offerings.

“Nobody gets diluted more than I do during all this dilution,” Farnsworth, who owns 2.14% of the company, said. “We are obviously in a place where this company has grown so quick so fast that it continues to need money, especially for MoviePass.”

Farnsworth also addressed concerns that MoviePass may never become profitable, saying the company is on track to post a profit when it hits 5 million subscribers, though he did not provide an update on current subscriber numbers.

“What people really don’t realise, is it’s not about making money on the subscribers,” he continued, touting investments by MoviePass in movies like Gotti and American Animals, both of which have posted solid box-office numbers since their release.

“It’s a fastest-growing paid subscription ever in the history of the internet – period,” Farnsworth said. “So you’re not going to go through that without headaches.”

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