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The hottest startup to disrupt Hollywood since Netflix is getting rave reviews from moviegoers, but not so much from Wall Street. MoviePass rose to fame by allowing customers to see one movie every day at participating theaters for a subscription fee of only $9.95 a month. MoviePass then covers the full price of the ticket.
The rapid success means parent company Helios and Matheson, which bought the popular service last year for $27 million, is burning through cash. The costly business model threatening to make this a cautionary tale of what happens when a red hot startup becomes part of a publicly traded company too soon.
Reuters correspondent David Randal is on the story.>> The problem with MoviePass is that it's essentially running out of money. Its auditor said in April that it had concerns about its ability to stay open. And in May, it said that it only had $15.5 million worth of cash left.
A publicly traded company has to tell its investors publicly what's going on. If you're a private company, you have to tell that to your investors, maybe the VC fund in Silicon Valley, but you don't have to tell that to everybody. So you have this extra leeway to kind of figure out what you need to do before you're kind of in the spotlight.
MoviePass decided to go in the spotlight right away.>> The spotlight causing a stampede out of shares of Helios and Matheson, which have plunged 90% so far this year, leaving the parent company with few options for MoviePass.>> They can be acquired, by a Netflix or an Apple or something else.
Or they could just sell the MoviePass brand. Analysts say that the MoviePass brand alone is probably worth more than $200 million now, which is well more than company's market cap.>> The other option, either raise subscription fees or limit how many movies can be viewed per month by the 5 million movie subscribers it plans to have by next year.