Helios And Matheson's Terrible Week Puts MoviePass' Future In Doubt

Helios and Matheson Analytsics Inc HMNY is down more than 70 percent this week, falling under $1 per share, on increased concerns about the MoviePass business model. Here’s a recap of what's going on with Helios.

'A Joke'

Wedbush analyst Michael Pachter bashed MoviePass on Benzinga’s April 30 PreMarket Prep trading show: “MoviePass is a joke and I think will be out of business in 18 months, if not sooner,” he said.

On May 4, Sinema launched its own $4.99 and $6.99 monthly subscription options, both of which are cheaper than MoviePass’ service and potentially much more financially sound. MoviePass customers pay $9.95 per month for up to one free movie ticket per day.

Sharp Sell-Off Begins

On May 8, Helios stock crashed 30 percent after AMC Entertainment Holdings Inc AMC trashed MoviePass’ business model and a new Helios filing revealed the company is burning $20 million in cash per month.

AMC CEO Adam Aron said MoviePass paid AMC $12.02 per ticket in the month of April and its subscribers went to an average of 2.75 movies.

Helios CEO Ted Farnsworth defended the company’s position in a statement to Variety: “We have always known, from when MoviePass took off in August, that it was going to be a high cash burn business model,” Farnsworth said.

MoviePass cut its price last August from around $50 per month to $9.95 per month.

Wedbush's Pachter updated his bearish take May 9. “They're burning through $20 million a month and have $40 million on hand, so they can last two more months,” he said in an email to CNBC.

What's Next?

On Friday, The Washington Post published an article highlighting the idea that MoviePass’ subscription movie model appears to be working, even if the company’s finances are not. The Post story said MoviePass has demonstrated the subscription model has appeal to customers, but it may not survive long enough to demonstrate that it can also make financial sense.

Over the past two days, there have been a tremendous amount of large Helios option trades in the market. The Benzinga Pro screenshot below of Helios option alerts over the past two days shows that traders are clearly paying attention to Helios’ situation and expecting the volatility to continue in the weeks ahead.

Helios and Matheson was trading up 11.94 percent at the time of publication Friday afternoon at 68 cents. The stock closed lower each of the previous 11 sessions.