Markets Insider

Shares of Helios & Matheson Information Technology, the parent company of MoviePass, sank more than 40% Thursday after the company announced it sold new stock at a hefty discount.

Helios & Matheson said in a regulatory filing late Wednesday that it had sold 10.5 million shares at a price of $2.75 — a hefty 28% discount form its closing price earlier that day of $3.83. When markets opened Thursday, the stock's price tanked.

The losses come at an inconvenient time for MoviePass, which is struggling to stay afloat amid heavy losses. Earlier this week, the company's auditor, Rosenberg Rich Baker Berman & Co., said it had "substantial doubt" that Movie Pass could stay in business after reporting a $150 million loss.

Helios & Matheson CEO Ted Farnsworth downplayed the significance of the "going concern" warning to Business Insider, saying such a warning was in "pretty much most" 10-K filings when a company is running at a loss. "If they don't raise money, they could go out of business," he continued.

Such statements, though, aren't triggered by a company's profits or losses. Instead, they reflect the auditor's view on how viable a company is in the year forward.

Since MoviePass dropped its subscription price to $9.95 a month last summer, which allows members to see one movie per day in theaters, it has shaken up the industry. It has attracted millions of new subscribers, but many have questioned how it will continue to sustain itself financially given that it's paying most theaters full price for movie tickets.

Still, Farnsworth remains committed to the portfolio company. "I'm the biggest fan because I see what's going on from the inside and what Mitch is creating here," he said.

Jason Guerrasio contributed to this report.

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