Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a relatively strong start to the trading session. However, I’m here to tell you that these gains won’t last. Ultimately, the stock is popping up from recent lows as the result of a horrible earnings report. Gains seen in the current session will likely reverse. Today, we’ll talk about:
- Why we have such a bearish view of HMNY;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
HMNY Gains Won’t Last!
As mentioned above, Helios and Matheson Analytics is having a relatively strong trading session today. Before you get your hopes up, keep in mind that this is just traders trading. After serious declines in the value of the stock, some believe that support has been reached and that HMNY will head up from here. However, that belief couldn’t be further from reality. The truth is that there is a very good reason that the stock has fallen so hard.
HMNY made its name through the acquisition of a majority stake in MoviePass, an unlimited movie theater subscription service. However, the cost of the service continues to mount. After all, the company pays full price for movie tickets used by subscribers.
As a result of these adding costs, HMNY has made a couple moves:
- Dilution – Most notably, Helios and Matheson Analytics has greatly diluted shares. Any time it needs funds to cover the losses associated with MoviePass, the company looks to the market or issues new shares to institutional lenders that are then dropped on the market. This has greatly diluted shares, leading to a more than 99% reduction in value in a matter of months.
- Limitations – Recently, HMNY announced that it would limit subscribers to 3 movies per month. Ultimately, the company is hoping that this will help to curb losses.
Unfortunately, these moves simply aren’t good news. First and foremost, we know that dilution is just about always a bad thing. However, moving off of that topic, the limitations put in place aren’t going to save the company. Even with these limitations in place, if MoviePass subscribers only use their subscription twice per month (the limit is three times), the company will lose between $5 and $7 per subscriber per month. This accounts for subscription and non-subscription revenue. Considering that the company has around 3 million subscribers, even with these changes, the company will lose a minimum of $15 million per month and will need to access funds very soon with only $15 million on hand! The bottom line is that HMNY is going nowhere fast!
What We’re Seeing From The Stock
Regardless of our bullish opinion, traders are looking to take advantage of what looks like support. So, we’re seeing gains in the value of the stock in today’s session. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:11), HMNY is trading at $0.050 per share after a gain of $0.0024 per share or 5.00% thus far today.
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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 seeing just how long it takes for this stock to fall to where it should be… ZERO! Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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