HMNY Moviepass, Sex Tapes, What’s a Bad Brand Worth?

Moviepass is definitely becoming a candidate for a friendly or hostile takeover. There are many rumors now flying around that different VC companies are taking a fresh look at the company.

Looking at the latest rounds of press and the stock price now at .07 – it would be logical to assume that death of the company and the brand is a forgone conclusion.

An alternative idea is now being considered by VCs that the brand and at least part of the business model for Moviepass has considerately more value than what is represented by the stock at today’s market capitalization. Currently the Market Capitalizing sits somewhere around $2M dollars. That number is difficult to know each day as the company floods the market with more and more shares everyday. Using the 5B share ATM it has available to it.

Obviously there’s some realistic chance that MP will go BK, but I continue to believe that is unlikely, and my updated models show that changes made have seriously reduced cash burn- agreeing with the company’s guidance that they are trending toward financial stabilization.

I am not the ONLY person who sees some value here. We live in an age where publicity, even bad publicity is valuable. Think Paris Hilton or Kim Kardashian sex tape here. When these tapes came out many years ago people thought it was unfortunate and embarrassing for the young ladies involved. Nobody dreamed that the Kardashian’s mishap would have resulted in a billion dollar worldwide brand with clothing lines, makeup lines and so much more. That’s right there was a point where people actually felt “sorry” for the Kardashian’s invasion of privacy! The same holds true with Paris Hilton, who leveraged her naughty deeds into nightclubs, restaurants and all kinds of other lucrative ventures based on her universal name recognition.

As I have mentioned in prior posts, I was part of the original marketing team before Microsoft launched the “Bing” brand to try and compete with Google. At that time we were asked by the CEO to come with various estimates as to what it would cost to create a consumer brand from scratch that could achieve 60-70% unaided brand awareness. This is simply a measure of if consumers have heard of you at all, not of they like you or intend to use your service. That was almost 10 years ago now, and at that time the LOWEST estimate we had for that endeavor was it would take $600 million dollars of Marketing Spend to hit that level of awareness.

Moviepass love it or hate it, is now very well known. It is a brand and it is a thing consumers understand and have real interest in. Many people loved MP before financial trouble hit. The nasty trouble and changes MP is going through now, can be amended, fixed and restored. Like the sex tapes of Hilton and Kardashian – the name is known and the sins of the past could easily be forgiven.

I estimate the publicity of Moviepass to easily be worth $100’s of millions. And to think a crafty VC firm could potentially take a significant position of HMNY for less than $1M today seems like a good value bet.

The obvious risk here is that Farnsworth has Billions of shares at his disposal, and he could dilute any would be acquirer by simply dumping billions more shares on them.

But, a hostile takeover may also be possible. In that case if a firm took a large enough position quickly enough, they could storm the company and get at least a temporary injunction to halt additional dilution, and potentially nab the entire company for a very attractive price.

I expect some action on the acquisition front very soon here. It will be a fascinating next chapter!

2 Replies to “HMNY Moviepass, Sex Tapes, What’s a Bad Brand Worth?”

  1. MoviePass Rating:
    It could be evaluated at $ 14.95 x 3 million current subs x 120 months or 10 years.
    This is:
    $ 5,382 Million / 5 Billion Shares = $ 1.0764 / share
    Now, this is after the R / S 1: 250 and the dilution of 5 B shares (7/24/2018)
    If the current valuation price of $ 1.0764 were reversed, the split of 250: 1 would be:
    5 B shares / 250: 1 = 20 Million shares,
    And the new valuation price would be: $ 1.0764 x 250: 1 = $ 269.10 per share.
    A possible sale or merger should be valued between 15 and 28 times the price of the share ie $ 269.10 x 15 times = $ 4,036.50, up to $ 269.10 x 28 times = $ 7,534.80.
    Finally, here the price is adjusted to the number of subs and the income generated by each subs in time.

  2. There are a lot of different things which go into discussing Movie Pass/HMNY, and I think it should be simple indeed. You must begin with deciding on what value to allocate to Movie Pass. You can choose any number of ways to do it. Current value per Subscriber vs expected growth. Risk-Adjusted Earnings. Etc. Etc. But it doesn’t matter because who knows.

    So, pick a number. 10M? 50M? 100M? 200M? 500M? Whatever the number, is your best guess valuation.

    The problem is that it just begins to clarify a picture. We are talking about the future, where it succeeds. So, you really must believe, the Company will succeed. If you don’t just short the stock, why even bother. If you do think it will succeed though and you have a number in mind, think about another number: the ultimate number of shares the Company currently intends to go to, which is 5B.

    You can continue to imagine that the Company will succeed but it doesn’t matter does it? What matters is if you will succeed with it. Will you? Does the Company give any indication that they care? Let’s complete the math.

    Let’s say you believe that the value of the Company is 500M. The fair value of each share (without adjusting for bankruptcy risk) is 10 cents per share. You can reverse split it some 1000 times over, and the market will value each share less than 10 cents in the most optimistic days with 5B shares in mind. Have you seen any responsible person from HMNY/MP say they intend to reduce the number of shares from 5B to 25M (as per the RS)? If not that every time, there is a reverse split the price will ultimately fall below 10 cents. More so in each RS because your current investors will keep getting more and more negative after losing money.

    Why keep that number of shares? Because MP needs money? Raise at 25M shares worth $20-30 each. Why raise 5B @ pennies while completely wiping out current investors? There is no business model which indicates MP needs more than 1.2B in investment over the next 12-18 months. Why do they burn their investors? Because they don’t care? All the public comments from CEOs have been fighting against investors. Fight against the shorts, idiots!!!

    The market is not stupid, and it will give fair value based on their plans. And their methods may be useful for the Company but have not an ounce of thought for their investors. Even if the investors stick with them to become the next Uber/Amazon, they will have pennies to show for it. As it stands, HMNY will need to be valued at 48 Trillion for the original investors to break even!!! At 25M shares, it would still be a high 250B, but maybe in 10 years, they can achieve it!!! That’s how venture capitalists invest? The problem it seems is MP is still trying to find VC money. They believe they will either get it or get a buyout.

    There is no world in which this CEO can realistically say he will pay back the investors. His venture can succeed but not his investors. And that’s not the kind of message people will intend to fund for long.

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