'Shocker' Of The Day: 'Tech' Company That Buys Movie Tickets For $10 And Sells Them For $0.33 May Not Survive
Over the past 4 weeks, the stock of a tiny New York based "IT service management" company, Helios & Matheson Analytics, Inc., has surged just over 1,300% after announcing plans to purchase a majority stake of an "innovative and disruptive technology company" called MoviePass at a $210 million valuation.
So how exactly does MoviePass, the "innovative" and "disruptive" tech powerhouse that it is, plan to change the entertainment world forever, you ask? Well, apparently by paying movie theaters $10 a pop for movie tickets and then re-selling them to their own monthly subscribers for a small 97% discount, or roughly $0.33 each (in the worst case scenario). Per Bloomberg:
The company sells a monthly subscription that gives moviegoers a daily pass to movie theaters for $10 a month - though MoviePass is paying theaters full price for tickets, which can cost $10 apiece or more.
Genius plan, right?
And while the company planned to supplement its top line with advertising revenue and deals with theater chains to share in concession sales, at least according to Bloomberg, a problem developed when its subscriber base ballooned from nearly nothing to 400,000 in a matter of weeks. Unfortunately, at least when you're business model is dependent upon selling your primary product at a 97% loss, the more 'successful' you are the more money you lose.
And while the ending of this particular movie seemed obvious from the start, it apparently eluded Helios investors until today when the company announced that the business they just purchased 4 weeks ago may not survive...all of which sent their stock plunging by 40%.
Helios & Matheson Analytics Inc., the backer of the controversial $10 MoviePass subscription, fell as much as 21 percent after warning the money-losing cinema service may not make it.
Helios boosted its support for MoviePass to $11.5 million from $5 million as part of an August deal to acquire a majority stake, according to a regulatory filing. At the same time, Helios said MoviePass’s auditors are expected to warn of substantial doubt about its ability to continue as a going concern.
Who knew that massive cash losses could be considered detrimental for a tech company?