MoviePass majority owner Helios and Matheson Analytics Inc. (NASDAQ: HMNY) bought old-time movie website Moviefone. The company’s stock promptly sold off. Investors understand that the ownership of a service Helios and Matheson Analytics paid almost nothing for will not help its subscription business model.
Moviefone was owned by Oath, the web portal company that operates AOL and Yahoo. Moviefone is one of the oldest properties on the web, founded in 1989 before broadband service was introduced to the public. It has an extremely modest 6 million unique monthly visitors, hardly enough to increase the MoviePass subscription count by much.
Helios and Matheson Analytics shares fell over 3% on the day of the announcement to $2.88, just above its 52-week low of $2.20, and well down from its 52-week high of $38.86. The company’s market cap is only $124 million.
The price paid for Moviefone was only $1 million in cash, and:
… 2,550,154 shares of common stock of HMNY (the “Closing Shares”), and the issuance of warrants (the “Closing Warrants”) to purchase 2,550,154 shares of common stock of HMNY at an exercise price of $5.50 per share …
So, the exercise price is about double the current value of the stock.
Whether or not MoviePass owns Moviefone, the service had to drop its subscription price to $6.95 from $9.95. Why would the service drop the price unless it had trouble adding new members? Logically, there is no other reason.
Commenting on the deal, Ted Farnsworth, Helios and Matheson Analytics board chair and chief executive, said:
HMNY’s vision is to have MoviePass support the entire movie theater industry ecosystem– from distribution to exhibition and now, content. Above all, we believe the Moviefone acquisition will serve as another valuable source of revenue for HMNY and MoviePass.
Based on the low price of the transaction, Moviefone was bringing Oath little money. That makes it hard to believe the service “will serve as another valuable source of revenue for HMNY and MoviePass.”
MoviePass continues to grasp at straws as it works feverishly to find a successful model.