Helios and Matheson Analytics Inc (NASDAQ: HMNY) is a stock that we have consistently warned our readers about. With a broken business model, no sign of profitability down the line and death spiral financing riddling the stock, there’s no reason to expect any substantial return of value. Now, to make matters worse, it looks like the company is preparing to strip investors of the little bit of value they have left through the issuance of new shares. Today, we’ll talk about:
- Why we’ve been warning about HMNY and the coming issuance of shares;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
HMNY Could Dilute Current Shareholders To Pieces!
As mentioned above, we’ve warned investors about Helios and Matheson pretty consistently over recent months. At the end of the day, the company is operating a business model that was made for losses. It all boils down to its majority-owned subsidiary, MoviePass. MoviePass offers consumers three movie tickets a month for the price of one. Unfortunately, the company pays full price for all three. As a result, each new subscriber on MoviePass becomes a new source of losses for HMNY and its investors.
As losses grew, Helios and Matheson has moved forward with various fund raising attempts, each seeming to be more damning to investors than the last. Now, it looks like the company is going to dilute shares to an extent that it has never done in the past. On Monday, Business Insider published a report warning that HMNY is likely to be preparing to issue billions of shares in order to raise cash in an attempt to keep the movie theater subscription service alive. This overwhelmingly dilutive would likely bring some serious pain for investors.
At the moment, HMNY has about 1.7 million shares outstanding, that is, after the ridiculous 1-for-250 reverse split. Considering the share count, if the company were to issue one billion new shares, existing holders would be diluted out of about 99.9983% of the little bit of value that is left in their shares. Essentially, the move would wipe out any existing shareholder value.
While HMNY has not confirmed their plans to issue billions of new shares to cover the growing cost of MoviePass, it’s hard to argue the idea that this is coming down the line. MoviePass is leading to tens of millions in losses per month and the company simply doesn’t have the cash to keep the service afloat. So, without some kind of outside funding, the company is destined to go to zero. Nonetheless, even with the outside funding through the issuance of new shares, zero isn’t likely too far off.
What We’re Seeing From The Stock
As investors continued to lose faith in Helios and Matheson Analytics yesterday, the stock tanked, giving up 32.44% of its value as the dramatic declines that we predicted came to life. Today, the stock seems to be working to recover. With the massive declines in mind, traders are likely looking for a short term opportunity to grab some gains. Of course, our partners at Trade Ideas were the first to alert us to the movement. At the moment (7:35), HMNY is tading at $0.021 per share after a gain of $0.0010 per share or 4.95% 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 following the company to see what the next ridiculously dilutive move is that the company takes. With the current financial data and considering the losses MoviePass is generating, chances are that the next financial move will be the final nail in the coffin. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks.
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