Helios and Matheson (NASDAQ:HMNY), the majority owner of MoviePass has been burning through cash at the rate of about $21 million dollars per month according to company filings. Their auditor has expressed the opinion that HMNY appears to be facing the possibility of not being able to survive as a going concern in the future.
HMNY filed a shelf offering to increase its share count from 500 million shares to 5 billion shares. They also stated they will conduct a reverse split, ranging from 1:2, to 1:250, an amount to be decided by the board. The board made its decision on July 24th. They went with the 1:250 option, meaning if you owned 1000 shares on July 23rd, you now owned just 4 shares, with each share being valued 250 times higher than the day before. In other words, no change to the net value of your holdings, from one day to the next.
Obviously, both a 10X increase in share count and a reverse split, will cause mammoth dilution to current shareholders. Since these announcements, shares had fallen as low as $.085 per share where they wound up at the close on July 24th. Since the exchanges require that a share price be no lower than $1.00 for an extended period of time, a reverse stock split was virtually the only option available to deal with this situation quickly, or risk being de-listed by the exchange on which it trades.
Market Reacts To Reverse Split
With the share price having been adjusted at the close of trading on Tuesday, July 24th to $21.25, shares opened the following morning at $14.23, down a whopping 33%. This was obviously the opposite of a vote of confidence by investors. Short sellers seized on the opportunity to once again short the stock and make money on the downside. Many brokerage companies do not allow investors to short a stock if it falls below $5.00 per share, so the reverse stock split opened new pastures once again for the shorts to exercise their negative opinion on the stock.
Having bought our original position, pre-split at $3.04 per share, we were the short-lived beneficiary of an excellent spike in share price, to the $4.80 level when investor enthusiasm was still riding high several months ago on many positive company developments. Several months later, most of our capital, on paper, has decreased markedly to date.
This is how trading was going on the first morning after the reverse split. In fits and starts, everything seemed to be rolling downhill.
Helios and Matheson Analystics, July 25, 2018, Pricing
This is why we took such a small position in the first place, to limit our exposure to this risk. The position amounted to less than 1/2 of one percent of total portfolio capital.
All of the recent developments that I’ve chronicled in this and past articles portray a company on the move. HMNY is being very aggressive in acquisitions and aggregating value-added services and features from each new partner, be it new theater chain partnerships like Flix Brew, consummated a few months ago, buying of MovieFone to acquire their features and subs and all-important data they can harvest and sell, and now another partnership with a huge music subscription service to cross promote their own subscriptions to each other. They have also gone on to form a movie production and distribution unit, and have already put two movies into theaters. They now share in ticket sales and distribution revenue.
Should the managements of each of these forward-looking companies succeed in growing out their subscriptions together, the potential and probability that MoviePass and, by extension, Helios and Matheson reach profitability is increased.
With increasing announcements and new partnerships, should subscriptions reach the 5-10 million mark by the end of the year, substantial upside in this company’s stock price is foreseeable. The company, in the face of many doubters, continues to project they will reach profitability by the end of 2018 or possibly early 2019.
HMNY, as an analytics company, believes it is aggregating huge amounts of saleable data that movie production companies, distributors and theater owners will be interested in buying. Data on movie-goer habits, days of the week they attend movies, at what hour of the day, as well as which movies they go to are all a part of the data package they seek to sell.
If MoviePass and HMNY can stay in the game long enough to raise the $1.2 billion it says it needs to get to the home stretch of profitability, it may pull off a revolutionary disruption of the movie industry which will inure to the benefit of subscribers and shareholders, alike. Are its days numbered? Only time will tell.
Digital Stock Market Tool to Monitor/Research Positions
One of the many useful digital stock market tools we’ve built to monitor our HMNY position is the very robust New 5.3 Watch List Real Time Tracker. This handy and intuitive tool allows us to list our portfolio positions and get real time data on a host of market data, essential to helping make our stock market decisions.
After you make just two inputs, this powerful digital tool will give you all the necessary data you need, all in real time, all updated throughout the day to help guide you to your preferred target price.
ay the price that YOU want to pay and get the yield that YOU want!
Like the Real Time Portfolio Tracker, this tracker functions in real time and is updated continuously throughout the day.
There are only two simple inputs for you to make; ticker symbol and number of shares you contemplate buying.
Current dividend yield, is automatically delivered to you, gradated by shades of color for quick identification of magnitude of yield. Your target yield, based on your chosen target price and current dividend is also gradated in shades of color. The annual dividend rate is delivered automatically. No more hunting on finance sites for this data.
Also automatically delivered to this tracking tool is the P/E ratio, making comparison to other stocks a snap, EPS (earnings per share), Beta- giving you an idea of how closely your stock follows major indices, how volatile its price might be, how it compares to other stocks in the same sector, fifty two week high price, fifty two week low price, % from the high- how much higher or lower it currently is compared to its 52 week high, and % from the low- how much higher or lower it currently is compared to its 52 week low. These are among the many other essential metrics delivered to you automatically in real time, all day long.
Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.