Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a rough day in the market today after announcing that it plans to issue convertible notes in the aggregate principal amount of $100,000,000 in an attempt to fund MoviePass further. While this is leading to concerns among investors, I wouldn’t count this company out just yet. Today, we’ll talk about the fund raise, the value in MoviePass that I believe many are overlooking, and what we’ll be watching for ahead.
HMNY Announces Plans To Raise Funds
As mentioned above, Helios and Matheson Analytics isn’t having the best of days in the market today after announcing yesterday that it plans to raise funds through the sale of convertible notes. The company said that it has entered into a securities purchase agreement with institutional investors. Under the terms of the agreement, the company intends to sell $100,000,000 in convertible notes. These funds will be used for the further funding of MoviePass as well as general corporate purposes. The notes will be convertible at the option of the holders, at a fixed price of $12.06. This price is subject to adjustment.
In the press release, HMNY said that the investors have paid for the notes with $5 million in cash up front. $95 million was also paid in investor notes payable to HMNY. The investors will be required to prepay about $15.65 million of the investor notes to the company in equal weekly payments over the next seven weeks. In a statement, Ted Farnsworth, Chairman and CEO at HMNY, had the following to offer:
“We couldn’t be happier to fuel MoviePass’ growth to enable its subscribers to consume entertainment where it’s best consumed – at the movie theater… Better performance of films during their theatrical window signals greater success throughout the film ecosystem and that’s our ultimate goal. We take the participation of Canaccord Genuity and its institutional investors as a great vote of confidence in HMNY and MoviePass’ future. With the viral and word-of-mouth-driven subscriber growth MoviePass is experiencing, we believe MoviePass is the future of out-of-home entertainment.”
How The Stock Reacted To The News
While the reason for the need to raise funds is a great one, investors are ultimately concerned with the dilution this could create. As a result, HMNY isn’t having the best of days in the market today. In fact, the stock is currently (10:30) trading at $12.59 per share after a loss of $1.61 per share (11.32%) thus far today.
The Value Of Helios And Matheson Analytics Could Grow Dramatically
At the end of the day, it seems as though many are discounting the potential at HMNY. Sure, when we look at the cost of the MoviePass subscription and the cost of a movie ticket to the company, well, losses can be generated. However, many seem to be underestimating the value of big data. After all, Helios and Matheson did say that it intends to sell the data it drives in.
I also have to bring up a great point made by Maxim Analyst Brian Kinstlinger. In a recent note, Kinstlinger wrote the following:
“We argue large movie theater chains will benefit from MoviePass that we expect will help revive movie ticket sales, which leads to more concession sales… Furthermore, we believe the Hollywood studios may be less hesitant than the theater chains to compensate MoviePass if it can fill more seats.”
At the end of the day, MoviePass is a revolutionary product that has the potential to bring revival to the movie theater industry. In fact, the product has a largely positive effect on the entertainment industry as a whole. With such a benefit to the entire ecosystem, it makes sense that there will be tons of profitable opportunities from seat reimbursements to deals with large movie theater chains in the future. All in all, what we’re seeing from the big HMNY hit that is MoviePass is nothing more than the tip of the iceberg at the moment.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on HMNY. In particular, we’re interested in watching the continued evolution of MoviePass, as we believe that the product is a diamond in the rough. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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