Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having yet another rough start to the trading session this morning following the massive declines we saw on the stock yesterday. If you’re an avid reader of CNA Finance, you’ve known that this stock was headed for the bottom, but what was it that caused yesterday’s declines? And is now the time to buy the dip? Today, we’ll talk about:
- What caused the declines;
- why this isn’t a dip that should be bought;
- what we’re seeing from HMNY; and
- what we’ll be watching for ahead.
HMNY Closes Funding And Announces Delisting News
As mentioned above, yesterday proved to be a rough day for Helios and Matheson Analytics. So, what’s the deal? Well, there were two things that happened yesterday:
- First and foremost, HMNY announced that it closed an offering that was announced just under a week ago. The offering included $164 million in convertible notes as well as 20,500 shares of preferred stock. The convertible notes included in the offering mature in two years. While the company was able to drive $20.5 million through the doors thanks to the offering, the dilution is a major concern to investors.
- The second bit of news that caused the declines had to do with the NASDAQ. The company announced that it received a letter of deficiency from the NASDAQ on June 21. In the letter, the NASDAQ warned HMNY that its price per share was under $1 in the last 30 consecutive closes. As such, the company is in danger of delisting. Nonetheless, a plan has been submitted to regain compliance through a reverse split that would artificially raise the share price. So, delisting, at least for the moment, isn’t a real concern.
This IS NOT A Dip Worth Buying
Sometimes, when a stock sees dramatic declines, it’s an opportunity to get in at a low price and make money off of the recovery. In our opinions, this is not the case with Helios and Matheson Analytics. The reason is a relatively simple one – the company is failing miserably! While the MoviePass service that put HMNY on the map is growing subscribers at a rapid pace, the service is also leading to growing losses. It doesn’t take a rocket scientist to see that growing losses is a bad thing.
The reason for the growing losses is simple. The company pays full price for tickets that MoviePass subscribers use but charges less than $10 a month to use the MoviePass service. Therefore, each subscriber that goes to the movies more than once a month generates a loss for the company. This has led to multiple offerings in an attempt to cover the cost of money lost on the MoviePass service. Unfortunately, it doesn’t look like this trend will end any time soon. Moving forward, more dilution is likely coming as HMNY reaches for straws in an attempt to find a way to turn a profit from a service that, quite frankly, isn’t likely to ever do so!
What We’re Seeing From The Stock
With the offering and potential delisting in mind, investors sent Helios and Matheson Analytics on a wild ride for the bottom yesterday, giving up 15.15% of the value of the stock. Today, the declines are relatively minimal, but the stock is still trading in the red. At the moment HMNY is sitting on a loss of 0.48%.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on HMNY. In particular, we’re interested in watching to see what the company does next in a desperate attempt to turn a profit. While we believe that these attempts are futile, anything can happen in the market. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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