After it was revealed that MoviePass borrowed $5 million to keep its service up and running last week, many subscribers were greeted by a blank screen on Monday (July 30). According to reports, MoviePass subscribers encountered a message that read, “There are no more screenings at this theater today.”
On Monday, stock for MoviePass parent company Helios and Matheson Analytics (HMNY) plunged by 60 percent — and many users are saying this is the end for the movie subscription site.
This week, after the MoviePass service went down and processors halted operations last week due to a failure to pay business partners, it was reported that HMNY arranged a short-term loan. The company will use $5 million of a $6 million loan to pay its processors. The loan was from Hudson Bay Capital Management.
Under the terms of the loan from Hudson Bay, the lender can demand repayment of more than $3 million on Aug. 1 and the remainder on Aug. 5. Proceeds from a stock sale must be used to pay back the loan, reported Bloomberg. If the company doesn’t pay the money back, it faces a 15 percent annualized penalty until it does so. If the payment is 48 hours late, the interest could jump to 130 percent, the report noted.
The week prior, the company announced it will institute a reverse stock split of its issued and outstanding common stock.
“We believe this is an important step that will facilitate our access to capital over the next several years and enable us to implement our growth plans for MoviePass, MoviePass Films, and MoviePass Ventures, and will enable us to pursue potential acquisitions to grow our business,” said Ted Farnsworth, CEO and chairman of Helios and Matheson, in the press release. “With greater access to capital, we expect to solidify our position as the Number One movie theater subscription service in the U.S. and continue to revolutionize the movie industry.”
However, competition from Sinemia and AMC is looming, with each expected to offer more reliable services. For current MoviePass subscribers, it hasn’t been easy jumping ship. Many users have reported problems with cancelling the service. Reports noted that there is even the possibility that the Federal Trade Commission (FTC), and other consumer protection groups, might get involved in the issue.