HMNY10K – A Few New Items – Overall Story Remains Unchanged

Helios & Matheson released their 10K this week  revealing a few interesting new developments on MoviePass.

Of primary importance, the company revealed that it now owns 91.8% of MoviePass.  Up from the previous 82% holding from the company.

The increased position taken by Helios (HMNY) removes a great deal of uncertainty related to the passthrough structure and proxy battle that has been a concern for investors.

Separately, Ted Farnsworth was quoted in a new cover story for  Variety where he took an IPO of MoviePass off the table.  In the article it says,

“Farnsworth rules out spinning off MoviePass from Helios and orchestrating an initial public offering. “We’re so busy doing what we’re doing that we don’t have time to do that,” he says. However, he is considering rebranding Helios’ public listing to reflect its ownership of MoviePass because he believes the subscription service is a better known brand.”

I see this as a bullish development as it clears up confusion on corporate structure going forward.  It also demonstrates that MoviePass will soon be the leading brand for the company, and it won’t be long before they rebrand the Company name, Helios & Matheson, to MoviePass, and they will likely change the stock ticker of HMNY to better represent that new brand. Maybe it will be MVP or something like that.    As silly as it may seem, a stock ticker that represents the company brand helps a stock by attracting more retail investors.  So it is a good plan for the company to move forward with a new branding.

Finally, it was also revealed today that Helios does not face any near term liquidity meltdown that many have feared given the massive spending taking place to build the MoviePass subscriber base.  In the Variety story Farnsworth has this to say about running out of money.

“Since day one, people have been saying we’ll run out of money,” says Farnsworth. “I assure you that capital is not an issue. I’m sitting on hundreds of millions of dollars of dry powder, and I’ve got bankers and debt-financing companies calling me all the time. They know they’re looking at an Uber or an Airbnb. This is a unicorn company.”

There was also a bit of a dust up surrounding Farnsworth claiming the company had secured a $375 Million line of credit to float the company’s cash needs.  It turned out that the company did not have a line of credit secured, rather it was a reference to a shelf offering that company had already executed, but has not yet sold into the market.

I continue to remain bullish on the MoviePass opportunity.  While the business model is not easily understood using simply math and accounting methods.  A longer term view that considers the disruptive nature of the company as they take advantage of more nuanced behavioral economics concepts continue to make this company look like they indeed do have a shot of becoming the next tech unicorn.