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MoviePass Parent’s Stock Plunges Again Following Warning on Cash Burn

The stock of MoviePass’ parent company, Helios & Matheson Analytics, plunged for a second consecutive session in the wake of a warning that the subscription service may be forced to reduce future growth due to a possible cash shortage.

Shares were down 66 cents to $1.45 in trading on Tuesday and slipped another 66 cents to 78 cents in heavy trading on Wednesday.

The declines came following a Securities and Exchange Commission filing by Helios & Matheson. The company disclosed it had $15.5 million in available cash at the end of April, plus $27.9 million on deposit with merchants while current monthly expenses are about $21.7 million. The filing said that if adequate funding doesn’t materialize, “We may be required to reduce the scope of our planned growth or otherwise alter our business model, objectives, and operations, which could harm our business, financial condition, and operating results.”

On Wednesday, Helios & Matheson chairman and CEO Ted Farnsworth issued a bullish statement to Variety.

“Our burn rate has been slashed by 35-40% by the implementations and abuse prevention measures we have put in place over the last few weeks,” he said. “We have always known, from when MoviePass took off in August, that it was going to be a high cash burn business model. We are not changing our guidance on 5 million subscribers by the end of this year, which should make us profitable/cash flow-positive according to our business model.”

“We have access in capital markets to over $300 million,” he added. “So there is plenty of cash available to sustain the subscriber growth and movie-going habits of our users.”

The company pays movie theaters full price for the tickets its customers buy, so it is essentially subsidizing their movie-going at a loss to its own bottom line. MoviePass claims that it will eventually be able to monetize its more than two million subscribers by running ads, partnering with theater chains, or figuring out a way to make a profit on the data it collects on its users.

MoviePass announced on May 2 that it would again allow customers to sign up for its popular movie-a-day monthly subscription package after briefly taking the offering off of its website. An independent auditor publicly raised questions last month about the service’s ability to continue operating.

The stock of Helios & Matheson hit a 52-week high of $38.86 a share  in October.

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