Helios and Matheson Analytics Inc (NASDAQ: HMNY) is a stock that has been at the center of attention as of late, and we’ve followed it for some time as well. While the stock suffers yet another day of declines, it seems as though the day of reckoning is upon us, and investors are realizing it. I will admit that just after the acquisition of MoviePass, I too was excited. However, after digging into the details, it became clear that this company was on a long road to nowhere and would ultimately find its way to $0 road, worthless lane, or even lawsuit circle soon enough! As the stock continues to fall, HMNY seems to be reaching for straws, recently announcing its most ambitious plan yet, becoming a movie producer. Here’s an overview of why we believe that this stock is a toxic one that investors should dig into before deciding to get involved!
Nearly A Year Ago, HMNY Looked Great
As mentioned above, when I looked at Helios and Matheson Analytics shortly after the acquisition of MoviePass, I have to say I was excited. The company took a movie theater subscription service that had few subscribers and announced that more than half a million had subscribed within a month or so. That’s impressive. However, how they did it wasn’t quite as impressive as it seemed to be.
When HMNY acquired the majority stake in MoviePass, the company drastically reduced the price of the service. In fact, the price was dropped from about $50 per month to about $10 per month. Of course, if the company had some kind of deal signed with movie theaters that made this profitable, well, that would be great. The only problem is, they didn’t.
This Is Where The Problems Started
For a few months, investor excitement in HMNY ensued as MoviePass continued to grow. Soon, more than a million subscribers would be going to the movie theater on an unlimited basis with a MoviePass subscription. Then, the bomb was dropped. Helios and Matheson Analytics announced the first of multiple offerings under which it raised money from the market. So, what was the reason that the company that saw such exponential growth needed money? Well, all that growth was only leading to larger losses!
In the release associated with that offering and other offerings since, HMNY explained that the capital would be used to purchase a larger stake of MoviePass, cover costs associated with the service, other general corporate purposes, and potential acquisitions. At the end of the day, MoviePass losses were massive, and the company needed help covering them.
Just How Expensive Is MoviePass For Helios And Matheson?
The truth is that MoviePass is becoming massively expensive, and that expense is only growing. That is ultimately the result of the fact that the company pays full price for movie tickets purchased by its subscribers through its service. Considering that the average cost of a movie ticket in the United States is just under $10, every time a subscriber visits the theater after the first time in the month generates a loss for the company!
As a result, HMNY is bleeding cash in an attempt to continue to cover the expenses associated with its ownership of MoviePass. In fact, according to the company’s last financial report, it’s currently bleeding through around $22 million per month and had around $15 million in cash on hand at the end of the quarter.
Desperate Attempts To Keep Investors Engaged
Recently, seeing that investors are quickly losing faith in MoviePass and Helios and Matheson Analytics, the company has been making desperate attempts to keep investors engaged. This started with the acquisition of Moviefone, a service centered around providing access to the entire entertainment ecosystem. With the acquisition, HMNY said that it will be able to further advertise MoviePass, greatly expanding its audience. However, before it attempts to expand its audience, shouldn’t the company work on turning a profit from the massive audience it already has? Well, that’s a question for another time.
In the most recent desperate attempt to excite investors, HMNY announced yet another acquisition that would allow it to own its very own film production company. That’s right, the company acquired Emmett Furla Oasis Films, launching MoviePass Films in the process and announcing to investors that it plans to produce 12 to 15 films within the next year. Really? Hmmm… let’s break that down my friends.
It really is a simple equation; in order to make a movie, especially one anyone will want to watch, you have to spend money. In fact, it costs about $65 million on average to produce a single major production film. That does not include the cost of marketing the film, around $35 million on average. So, here I am, wondering how a company with under $20 million in cash is going to float the cost of 12 to 15 movies at a whopping total between production and marketing of approximately $1.2 billion to $1.5 billion. I know, I know, they say “reach for the stars”, but really? How does the company plan on getting the funds to get this going? Can someone say… “Dilution ahead?”
What We’re Seeing From The Stock Today
As mentioned above, investors are quickly losing faith in Helios and Matheson Analytics as the stock continues to take a dive. So, what’s it doing today? Well, it’s trading at $0.41 per share after a loss of $0.012 per share (2.97%). That’s a pretty far cry from its recent high of $32.90, the price the stock was trading at less than a year ago on October 11th.
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The Bottom Line
The bottom line here is that HMNY, especially after the Zone Technologies spin off, is absolutely worthless. The company is now nothing more than a holding company that holds MoviePass as well as other subsidiaries that are likely to generate nothing more than a loss. I know that there are some die-hard bulls out there, and to each his own. However, the CNA Finance team urges anyone looking to get involved to do some digging before throwing your hard earned money into the fire!
Also, before anyone sends any messages or emails saying that we are short and we benefit from writing this article when the stock falls, that’s not the case. In fact, the author DOES NOT HOLD ANY POSITION IN HMNY NOR DOES HE INTEND TO IN THE NEXT 72 HOURS! This article may generate us some money from advertising, but our primary goal here is to provide information so that investors can make educated decisions in the market, even if that decision includes avoiding a stock like HMNY at all costs!
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