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A group of student investors thinks it can save MoviePass
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College students Nathan Yee, Sam Yaffa, and Yash Thukral have learned a lot about business from studying MoviePass parent Helios and Matheson Analytics over the past couple of months. All three subscribe to MoviePass, a movie-ticket service that gets members into a movie showing per day for $9.95 a month, and say their family and friends use the service, too. The platform grew rapidly to 3 million members over the last year, but costs also ballooned out of control, and led to frustrating service issues and changes to the platform. It all seemed to stem from financial troubles from Helios, which owns 92% of MoviePass, the students say.
“We observed that MoviePass was a thriving entity, but financially HMNY was and is a disaster,” Yee, who is entering his senior year of college, told Quartz. “As users of MoviePass, we identified with the company.”
In April, Yee, Yaffa, and Thukral launched Triton Funds—a fund run by students at UC San Diego and Cal State University, Northridge, with an advisory board that includes university faculty and alumni—to get hands-on experience investing in public and private companies. The fund is now partnering with Helios shareholders to make an offer to the company this week that would help it get MoviePass back on track, Yee said. He declined to share the details because the plan is still being finalized, but said the fund would “not need to be a majority shareholder of HMNY to accomplish our plan for MoviePass.” The $25 million fund typically invests between $250,00o and $2 million, Yee said, and is interested in companies, like MoviePass, that have a millennial focus.
The fund’s portfolio currently includes 20 companies, including bike- and scooter-sharing startup LimeBike, in-airport food delivery service AtYourGate, and the teleheath platform eWellness.
With the offer, Triton intends, for the first time, to take on an activist investor role. “This was a good assignment for us to put on our activist hats and act as a voice, an advocate for the shareholders and users that don’t have a collective voice for themselves,” said Yee, who said shareholders have reached out via mail and email in support of the fund’s plans for MoviePass after Triton shared some details on social media.
There are a few things Triton would like to see MoviePass do differently, including scrapping surge pricing, making all new movies available through the service, as it used to, improving customer service, and focusing more on the subscribers who go to the movies few enough for MoviePass to break even on them. MoviePass CEO Mitch Lowe said on CNNMoney on Tuesday (August 8) that 15% of MoviePass’s members, who go to the movies at least four times a month, account from 40% of its costs.
Triton outlined elements of its strategy in a video posted to YouTube on Aug. 6. That day, MoviePass announced similar steps, including a limit of three movies per month and an end to peak pricing on the platform. “It’s nice to see that we’re all on the same page,” Yee said. “We’re here to back Mitch’s vision.”
Yee said Triton subscribes to Lowe’s vision for MoviePass, but believes the company has lost sight of it as Helios struggles to balance the pressures of being a public company. The company, formerly The A Consulting Team, has been public since the 1990s and took a majority stake in MoviePass in 2017, just before it slashed its price to a sexy $9.95 per month. Shares of Helios closed around $0.07 on Wednesday, about two weeks after a reverse stock split adjusted the price to $21.25. Triton ultimately hopes to appoint a few board members and strategic advisors to support Lowe. Yee said the students aren’t interested in taking control of the company themselves.
Triton first approached Helios in April to offer growth capital in the form of equity or debt, but was told then the company was on an exclusive basis with its investment bankers and select investors, Yee said. It reached out again in late June but talks didn’t progress. Triton does not currently have a position in Helios.
Helios did not immediately return Quartz’s request for comment.