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Why MoviePass Parent Helios and Matheson Analytics Plummeted Monday

Daniel Sparks, The Motley Fool
Updated

What happened

Shares of Helios and Matheson Analytics (NASDAQ: HMNY) -- parent company of movie theater subscription service MoviePass -- were slammed on Monday, falling as much as 32.3%. At the time of this writing, the stock is down 29%.

The news comes after Helios and Matheson Analytics filed a universal shelf registration statement with the Securities and Exchange Commission (SEC) that may allow the company to raise capital through debt or equity over the next three years.

A chalkboard sketch of a stock price falling
A chalkboard sketch of a stock price falling

Image source: Getty Images.

So what

Helios and Matheson notes that the shelf registration statement would enable the company to "offer and sell, from time to time, up to $1.2 billion of a variety of its equity and debt securities over a period of three years." But the registration statement will have to be declared effective by the SEC first.

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Any capital raised would provide the company with greater financial flexibility, Helios and Matheson said in a press release about the registration statement. The flexibility could help finance growth of Helios and Matheson's 92%-owned MoviePass Inc., as well as its movie investment and original-content production subsidiaries and its media content advertising platform.

What now

Investors are likely concerned that new debt or diluted ownership from any equity raised would increase the risk profile of what is already viewed as a risky investment. They seem skeptical of the company's business model, which sells a monthly subscription to see movies in theaters once a day every day of the month for just $10.

As investors fret, customers seem happier than ever. MoviePass recently hit three million subscribers, and management expects that number to exceed five million by the end of the year.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.