UPDATED with closing stock price. As one of the biggest movie weekends of the summer begins, news of a MoviePass service interruption is crushing the stock of its parent company and raising new questions about the subscription ticketing service.
Paramount opens Mission: Impossible – Fallout today, which had strong Thursday previews and is expected to provide the latest shot of energy in an already vibrant summer season for Hollywood. But for MoviePass, the controversial $10-a-month subscription ticketing service, the faster the turnstiles turn, the more tickets it has to buy in bulk to make good on orders by its more than 3 million subscribers. In June, the company said it burned $45 million due to the brisk pace of moviegoing.
In an SEC filing this morning, the company disclosed a glitch Thursday affecting its payment system had required it to secure an emergency loan of $6.2 million. Most of that amount will be used to pay the company’s merchant and fulfillment processors. Stock in parent company Helios & Matheson has plunged a spectacular 71% today on the news, ending the session at exactly $2 a share. After a 1-to-250 reverse stock split took effect earlier this week, the shares were propped up from 8 cents to more than $20 but have quickly fallen back to earth amid questions about the service’s resources.
Particularly unsettling to Hollywood are these lines in the filing: “If the company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018. Such service interruptions could have a material adverse effect on MoviePass’ ability to retain its subscribers. This would have an adverse effect on the Company’s financial position and results of operations.”
Ted Farnsworth, chairman of Helios & Matheson, told attendees at a business conference on Tuesday that the company would control nearly 50% of all movie tickets purchased in the U.S. by the end of the year. MoviePass projects it will have about 5 million members by that time. The stock action today, and the warning contained in the SEC filing, is a reminder that a lot of box-office dollars could become vulnerable if there is another ticketing outage.