Page 2 is very enlightening. Here is part of it
But no matter what the future holds, bulls and bears alike must acknowledge that MoviePass is a real company. To be sure, the company has proven itself with mounting evidence of being a legitimate organization that is simply making a bold bet:
CEO Mitch Lowe was a founding executive at Netflix (NFLX) and President at Redbox. Both were once considered controversial, as MoviePass is now. However, both grew to levels never imagined by most investors (or their “old world” competitors).
None of this guarantees success for MoviePass, but it does shine a clear light on its nature (and the distinction between a pipe dream and an aggressive start-up mentality). Lowe is reportedly in regular contact with Hastings, providing further evidence that MoviePass is pursuing a real opportunity (regardless of one’s opinion on how it will turn out).
There has been no insider selling. In fact, executives on both sides have signed off on significant lock-up agreements. In other words, they are unlikely to cash in unless MoviePass can justify its valuation for an extended period of time. Make no mistake -- few have more to lose than Mr. Farnsworth and MoviePass CEO Mitch Lowe. They’re in it to win it.
Two weeks ago, Helios raised $100 million via the issuance of convertible notes. Canaccord Genuity, a reputable Wall Street institution, served as the sole placement agent for the financing. Reading through the SEC filing, this funding is essentially structured as a loan that accumulates interest (doesn't pay it out) and can be converted into shares of HMNY at $12.06 per share.
Most of the $100 million has not been tapped. Of course, the untapped portion should not be considered dilutive unless/until it gets utilized / converted. The structure demonstrates a significant show of faith in the business and is likely meant to fund MoviePass until its anticipated IPO. The terms were favorable for Helios, suggesting that the investors didn't make this deal for the interest or to convert at $12.06, as neither would appropriately compensate them for the risk of loss. These investors are likely looking for a bigger payoff when MoviePass goes public. Investors should also know that $100 million raises are exclusively reserved for large companies, IPOs, and legitimately ambitious opportunities. Clearly, MoviePass fits in the latter bucket… but importantly, it does fit.
$100 million secures the foreseeable future for MoviePass. However, Helios and MoviePass didn’t stop there. The newly-announced $6.95 deal will enable the company to rake in close to $9 million of cash up front for every 100,000 customers it signs (and they’ve been adding about 200,000 per month). In other words, the $100 million is there for the taking, but management continues exploring more attractive ways to fund its customer-acquisition phase.
MoviePass works. It’s true that complaints can be readily found online, but 1) the company was initially caught off-guard with the level of demand it experienced and 2) with 600,000 customers, even a 99% satisfaction rate would result in 6,000 dissatisfied customers.
As mentioned above, MoviePass has over 600,000 customers and rising. Triangulating the company’s customer announcements (300,000+ as of Aug 31… 400,000+ as of Sept 14… and 600,000+ as of Oct 18), app download data, and other factors (such as its limited-time $6.95 offer), I estimate that MoviePass will reach one million subscribers around Black Friday. If so, investors can expect the marketing-minded Mr. Farnsworth to leverage that serendipitous timing to the company’s maximum PR potential.
Mainstream media (including CNBC) has validated MoviePass by acknowledging it. Everyone is entitled to their opinion on whether the company’s strategy will pay off, but it would be foolish to think that the company isn’t executing against a legitimate strategy (as evidenced by the data points above). The media figured this out months ago.
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