Shares in Quickflix, the Australian online and movie rental Company, have been placed in a trading halt; the move comes as the Company struggles to raise cash to fund their operation. Questions are also being raised as to the value of their subscribers.The halt will last until the opening of trade on Thursday 15th November.
Earlier this month the Perth based Company released their latest financial results, which revealed they were witnessing significant subscription churn. They also admitted they are burning through cash with the Company spending $3.5M during the last quarter.
In their latest financial filings with the ASX the Company said the number of paying customers lifted by 7 per cent to 119,593 during the quarter while total subscriber numbers lifted by 9 per cent to 129,274.
However questions are now being raised as to whether the claimed subscribers are actually spending money with Quickflix.
Investigations by ChannelNews reveal the Company has been counting subscribers who have only been spending $1 to get access to a movie rental.
In an effort to generate an increase in subscription numbers, Quickflix has launched promotions giving away free trials of the service. By charging a nominal fee such as $1 & $2 for a trial over 4 weeks they have managed to attract more interest than giving the trial subscription away for “free”.
The trial subscription offer is only available to new members and only once.
Despite the minimal spend these consumers are counted as paying subscribers, sources in the Company have told ChannelNews.
Recently Quickflix promoted $7 for 7 weeks to get more longevity out of their subscription marketing.
It’s also alleged that the Company has resorted to counting gift cards that are supplied to wholesalers despite the fact that these gift cards have not been activated as a paying subscriber.
“These gift cards are simply purchased by a partner and have not yet attributed to an actual subscriber, or have been redeemed. In fact, they may all go unredeemed but the number is still counted as paying,” a source told ChannelNews.
Calls to Quickflix management have not been returned.
In their latest filing with the ASX, the Company has said they are now down to only $1.1M in the bank as of November. They have also admitted they are burning cash at $3.5M a quarter with observers claiming the Company could run out of money shortly.
In October the Company had $2.1M in the bank with insiders admitting they have been hunting for funding or a partner during the past six months with little success.
Currently their share price is trading down by 2/3rds at sub $0.6cents with the Company burning through $1.1M in cash in October alone.
Past capital raisings have failed to deliver the capital the Company has been chasing with observers now tipping that the latest halt could be because the Company is trying to mount a capital raising in an effort to save the Company.
In their last round of capital raising, the Perth based Company that took on board former Telstra Digital executive Justin Milne to boost their profile, only managed to raise $4M, despite going after $10M in funding.