Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a rough time in the market today, making it the third straight trading session in the red for the stock and following up on the massive declines seen just two days ago. Ultimately, the declines seem to be the result of a public offering. However, the offering, for many, signifies much more. Today, we’ll talk about the offering, what we’re seeing from the stock, what the offering signifies for many, and whether or not this is the end for HMNY.
HMNY Announces Offering
As mentioned above, Helios and Matheson Analytics has been having a rough run in the market over the past few trading sessions, with today being the third day in the red. Ultimately, the reason for the declines stems from a press release that was issued Tuesday, informing investors of an offering that would be taking place.
In the press release, HMNY announced the pricing of a best efforts underwritten public offering of an aggregate of 7,425,000 Series A-1 unites, with each Series A-1 Unit consisting of 1 share of common stock and one Series A-1 Warrant to purchase 1 share of common stock. The company will also be offering 11,675,000 series B-1 units. Each Series B-1 Unit consists of one pre-funded Series B-1 Warrant to purchase one share of Common Stock and one Series A-1 Warrant. The offering comes with a price of $5.50 per Unit. Also, the units will be exercisable at a price of $6.50 per share of common stock and my be exercised any time between the issuance date and the five-year anniversary of the issuance date. Through the offering the HMNY is expecting to bring in $105 million before deducting underwriting discounts and commissions as well as other estimated offering expenses.
In the release, Helios and Matheson Analytics said that the offering is expected to close on or about today, 2/15/2018, and is subject to customary closing conditions. The company said that it intends on using the net proceeds to increase its ownership stake in MoviePass or to support operations of MoviePass and MoviePass ventures. The funds will also be used to satisfy a portion or all of the amounts payable in connection with previously issued convertible notes, and for general corporate purposes and transaction expenses. Also, HMNY said that it could use the proceeds to make other acquisitions.
What We’re Seeing From The Stock
After a dramatic slide of more than 20% on the day of the offering announcement, HMNY has continued downward at a slower pace since. Today, the story is no different. Currently (10:53), HMNY is trading at $4.67 per share after a loss of $0.16 per share or 3.39% thus far today.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
What The Offering Signifies For Many
At the end of the day, offerings tend to cause declines. However, these declines aren’t generally as massive as what we’ve seen in the case of Helios and Matheson Analytics. The reason for this is relatively simple. For many, this offering signifies that the experts betting against MoviePass ever making it to profit. While I don’t see it that way, I definitely understand the thought.
Going back to the beginning of the involvement of HMNY in MoviePass, investors have been concerned that with a price of around $10 per month, the company would not be able to cover the cost of movie tickets purchased by its subscribers using the service. Ultimately, any user that goes to the movies more than once in a month generates losses, well, at least, that’s the idea here.
The reality is that a public offering of shares is a signal that the company is in need of money. If there was no need for money, there would be no need to dilute the shares currently in the market by offering new shares for sale. Some are arguing that the offering shows that the MoviePass service is a bust and that profitability is a long way away, if it ever comes.
Is This The Beginning Of The End?
The truth is that I understand the doomsday theory surrounding HMNY. The cost of movie tickets can be very expensive on the company, and I agree, subscription fees just aren’t going to be enough to foot the bill. I also agree that the offering is a sign that Helios and Matheson Analytics is in need of money.
However, I have to say that I expected to see an offering on the horizons. The reality is that the company is working to sell data, advertising services, and more to generate a profit through the MoviePass subscription service. In fact, it has already announced the marketing of one Title through it’s services. However, Rome wasn’t built in a day, and while HMNY works to build Rome, it is going to need to cover the costs of building supplies!
At the end of the day, I’ve been impressed by the massive growth in users on the MoviePass service, but as it grows, so too will expenses. Nonetheless, Helios and Matheson is going to capitalize on the data and their ability to market movie titles, filling seats. In doing so, a profit will be built. Will it happen over night? No. Will this be the only offering? Hopefully, but there could be others in the future. However, the big question, “Will Helios and Matheson make MoviePass the blockbuster profit for investors that it should become?”
This is a very hard question to answer. However, what I do know is that the company has all the data they need in order to do so. With continued growth in MoviePass subscriptions, this data is likely to continue rolling. Another thing that I know is that the management team at HMNY is impressive, and likely has the skills to bring the service to the profit we need to see. The big factor here is time. With the continued growth in users, HMNY will need to act quickly with regard to expanding its efforts toward creating marketing and data sales plans and acting on those plans. If they do so, this is a big win. If not, well, the bears could be onto something!
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!