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MoviePass Backer Plunges After Warning Service May Not Make It

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  • Helios & Matheson also boosted support to $11.5 million
  • Users get daily pass to movie theaters for $10 a month

Helios & Matheson Analytics Inc., the backer of the controversial $10 MoviePass subscription, fell as much as 21 percent after warning the money-losing cinema service may not make it.

Helios boosted its support for MoviePass to $11.5 million from $5 million as part of an August deal to acquire a majority stake, according to a regulatory filing. At the same time, Helios said MoviePass’s auditors are expected to warn of substantial doubt about its ability to continue as a going concern.

The company sells a monthly subscription that gives moviegoers a daily pass to movie theaters for $10 a month -- though MoviePass is paying theaters full price for tickets, which can cost $10 apiece or more. As Wednesday’s filing called out, more frequent movie viewing by subscribers will lead to increasing losses and the need for still more financing. The company plans to earn money by aggregating data on moviegoers’ habits, advertising and merchandise sold through its platform, and possibly gaining a share of popcorn sales.

Helios dropped 17 percent to $27.18 at 9:47 a.m. in New York Thursday after falling to as low as $26.10 in intraday trading. The stock had more than doubled this month through Wednesday.

MoviePass granted New York-based Helios an option to acquire an additional stake valued at as much as $20 million, according to the filing Wednesday. The pact valued MoviePass at $210 million. Helios & Matheson own a 53 percent stake in the company. Most of the added commitment represented an acceleration of funds the companies had already agreed to.

Increased Commitment

Helios “agreed to increase its MoviePass investment commitment and acquired the additional MoviePass investment option after evaluating the significant and rapid increase in the number of MoviePass subscribers,” the company said in a statement.

MoviePass sparked an outcry in the movie business after cutting the price of its movie subscription plan to just under $10 from $30. That led to a flood of sign-ups that the company struggled to keep up with. The biggest movie-theater chain in the world, AMC Entertainment Holdings Inc., has said the plan is unsustainable -- because MoviePass is paying exhibitors full price for tickets -- and was looking to block the deal.

The filing Wednesday followed a tweet from short-seller Citron Research that said the stock should trade “back to $20.”

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