MoviePass Couldn’t Pay For Thursday Tickets, Operating On Borrowed Funds

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It would appear that MoviePass is working on borrowed time and borrowed money as the service was unable to pay for tickets on Thursday. MoviePass is a subscription based service that allows each subscriber to go to the theater each day and watch a movie for the rate of $9.95 per month. The subscription does come with conditions, the first being that it only works in conjunction with theaters that accept MoviePass. There was also a change to the terms of service (ToS), according to TomsGuide, that stopped allowing subscription holders from viewing certain movies more than once. Despite those drawbacks, the service appeared to be doing well enough to continue.

As this week opened, MoviePass was in danger of falling off the Nasdaq stock exchange until a last-minute reverse split of shares lifted the share price from $0.08 cents, to $21. That worked for the moment, but it did not solve all of the company’s problems. The company was still rumored to have a cash flow problem, which is what had been slowly driving share prices down in the first place. For a day, everything seemed to be okay, then posts started showing up on social media that people were unable to purchase tickets at the theater using MoviePass.

Thursday afternoon, it was revealed that MoviePass had failed to make a payment to one of their purchase and fulfillment processors, as reported by CBS News. By Thursday night, MoviePass released a statement advising subscribers use e-ticketing, which they claimed was unaffected and still operational. Stock prices for MoviePass dropped to about $7 per share and went even lower overnight after MoviePass announced subscribers should hold off on trying to use MoviePass until further advice could be provided.

MoviePass borrowed $5 million, as per a regulatory filing, Friday morning to pay their merchant and fulfillment processors. Their share price was down to $3.58 at the time of the filing. Since the filing became public, the stock has been in free-fall and down to about $0.07 cents by lunch, and about $0.015 cents currently. Variety posted a portion of the company filing regarding the outage.

“The $5.0 million cash proceeds received from the Demand Note will be used by the Company to pay the Company’s merchant and fulfillment processors. If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc. (‘MoviePass’), which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018.”

Whether this will be the end of MoviePass or just another business-as-usual blip is unknown. In a May filing with the Securities and Exchange Commission, it was disclosed that MoviePass only had $15.5 million in available cash at the end of April, plus $27.9 million on deposit with merchants, with monthly expenses of $21.7 million. Between that and their shares becoming a negligible penny stock today, the outlook is not predicted to be strong long-term.