MoviePass' parent company just bought itself more time to live, but it's still in imminent danger of being kicked off the stock exchanges
Vivien Killilea/Getty Images for MoviePass
- Helios and Matheson, the parent company of MoviePass, reached an agreement with its creditors Tuesday to reduce its outstanding debt.
- The move also will eliminate all of its outstanding convertible notes and replace them with non-convertible notes.
- By eliminating its convertible notes, the company freed itself up to sell potentially billions of new shares of stock.
- But the move comes on the same day that the Nasdaq could delist Helios and Matheson's stock.
The parent company of MoviePass, just gave itself some more room to maneuver, at least from a financial perspective.
Helios and Matheson reached an agreement with its creditors that reduces the amount it owes them and frees it up to sell billions of additional shares of its stock.
The company announced Tuesday that it will exchange two sets of convertible notes - debt that could be converted into stock - for new non-convertible ones. As part of that of that agreement, it will reduce the outstanding principal that it owes creditors from $44.5 million to $11.3 million. And the agreement allows the company to pay off the debt early for just half that amount, or about $5.7 million.
"Following consummation of the transactions contemplated by the exchange agreements, the company no longer has any outstanding convertible notes," Helios and Matheson said in a regulatory filing.
Representatives of the company did not immediately respond to an email seeking comment.
Helios and Matheson's future is in doubt
The reduction of the debt is significant for the company. The company has repeatedly warned investors that there is "substantial doubt" about its ability to continue as a going concern. As of September 30, it had just $4.9 million in cash on hand, while its operations had burned through more than $100 million in cash in the previous quarter.
But the cancellation of the convertible notes could also prove important for Helios and Matheson. The company has funded its ongoing operational losses from MoviePass' money losing theater ticket subscription service largely by issuing and selling new shares of stock, massively diluting shareholders in the process.
In recent months, though, its outstanding convertible notes have inhibited it from selling large numbers of new shares. The company has had to keep in reserve a certain number of shares if those notes were redeemed. As the company's stock price declined with its past dilution, the number of shares it had to set aside grew in inverse proportion, so that combined with the number of shares Helios and Matheson already had in circulation, the combined number exceeded the 5 billions shares it was authorized to issue.
In October, the company exchanged convertible notes it issued in June for non-convertible ones, alleviating some pressure on its share count. This move frees it up further still.
The agreement frees it up to sell more shares
Prior to the new agreement with its creditors, Helios and Matheson had 1.7 billion shares in circulation and 2.6 billion in reserve for the convertible notes, employee stock awards, and other purposes, according to documents it filed Tuesday with the Securities and Exchange Commission. With the cancellation of the convertible notes, it will only have to keep of fraction of those 2.6 billion shares in its reserves.
Unfortunately for the company, the move comes on the same day as it's in danger of being delisted by the Nasdaq. After Helios and Matheson's stock fell below $1 a share in May, the exchange warned the company that it would delist its stock unless it got it back above $1 a share on a consistent basis.
The company has been unable to do that, despite reverse splitting its stock in July. Helios and Matheson cancelled a shareholder vote that would have given it permission to do a second reverse split after encountering widespread investor resistance.
Should the company's stock be delisted, Helios and Matheson could find it harder to sell new shares and raise additional funds.