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Lessons From The 99.9% Drop In MoviePass

Summary

  • HMNY has seen a struggling stock price as shares have fallen 99.9%.
  • The business appears to now be showing signs of operational struggles as well.
  • Despite trading at an implied market cap of around $1 million, HMNY continues to be a sell based on its poor business model.
  • Shares continue to have 100% downside to zero.

Helios & Matheson Analytics (OTC:HMNY) has seen a dramatic 99.9% drop since I wrote that this was going to zero. While not quite yet at zero, shares trade below a dollar again, even after a gigantic 1 for 250 reverse stock split. This places its valuation around an astounding $1 million. The recent operational issues and emergency short term loan show very clearly how much this company is struggling. In this article, I discuss the key lessons to take away from this investment experience. As for my rating for HMNY, I reiterate an important truth. Despite already falling as close to the earth as one might think feasibly possible, shares always have 100% downside to zero.

(MoviePass)

Don’t Play The “Greater Fool” Game

The first lesson is in regards to my initial buy thesis, a lapse in judgment which I am not particularly proud of. My thesis was as follows: HMNY would maybe acquire a large enough subscriber base at which point they would maybe be able to negotiate concessions which would maybe allow them to operate profitably. There are a lot of “maybe’s” in this thesis which I would address only later after I lost money. The lesson I learned here was that Wall Street does not reward a half-baked thesis, at least not consistently. It’s a fool’s game to buy something just because one thinks that someone else will pay up for it. That’s exactly what I was doing when I bought HMNY thinking that my thesis which had poor odds of coming true would be enough to send shares higher from other investors who are willing to pay more for that lottery ticket.

It’s Never Too Late To Change Your Thesis

After I stopped to think critically about my thesis, it suddenly hit me that I had it

This article was written by

Julian Lin profile picture
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Julian Lin is a top ranked financial analyst. Julian Lin runs Best Of Breed Growth Stocks, a research service uncovering high conviction ideas in the winners of tomorrow. 

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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