The past couple weeks have brought MoviePass and it’s parent company HMNY to its knees. With no path to profitability and massive losses piling up, the stock has lost 99.9% of its value in just a few weeks. The reverse split puts its original share price at $0.0002, that’s 2 hundredths of a penny! With the original share structure it would take 50 shares to make a full penny. Is this company done-for? Or is this an incredible once-in-a-life-time opportunity to make some killer profits? I’ll share my thoughts and moves below.
Sugarmade (SGMD), is a small California-based company that supports the legal cannabis industry. They have a few innovative products and have made several acquisitions in the past year. This is also the stock I have made my single largest profit on, you can read more about that here. They sent out a press release last week which sent the share price soaring! It gained 40% in just one day! This company has a lot of potential between now and the end of the year.
The Fall of MoviePass and Impacts on HMNY
HMNY (HELIOS AND MATHESON ANALYTICS INC.) is the parent company of MoviePass, MoviePass Ventures, Moviefone, and Zone Technologies. We will start with the big news, MoviePass, which has been in the news and has been declared dead by many. I disagree and actually see some potential with its new business model.
MoviePass’ original offering was to allow subscribers to pay $10 a month and see as many movies as they wanted with a few restrictions. Moviepass was paying full price for the tickets, which can run well over $10 per movie. I have read many articles where analysis have theorized that MoviePass wanted to use the gym subscription model where they sell many subscriptions but few actually get used. I reject this completely because movies are already big business and the industry is making money hand over fist through people who come and pay more than $10 to see a movie. If you offer them the same entertainment at a fraction of the price, people will flock to it and use it. This is what Moviepass was counting on.
According their annual filing, HMNY intended to grow the subscriber base quickly and exponentially and leverage their purchasing power into multiple revenue streams from studios, theaters, concessions and advertisers. At the time of the acquisition, MoviePass accounted for about 6% of movie ticket sales in the United States. With the incredibly discounted offer, they hoped to grow that number to well over 50% at a lightening pace. If they control that much of the ticket purchasing they will have a lot of negotiation power and push movie goers toward or away from certain movies and theaters. They would essentially take control of the market and be able to dictate the terms to the rest of the industry.
The Future of HMNY
Keep in mind that MoviePass is only one of HMNY’s multiple companies. It is possible for a company to have one company go bankrupt and keep the others intact. That in and of itself tells me that HMNY has a future even if MoviePass does not.
MoviePass Ventures is set to release a movie staring Bruce Willis, a top A-list celebrity. His name alone will bring in $50 million in revenue even if the movie is terrible. Moviefone is a website that has more than 6 million monthly visitors. Zone Technologies is working a unique GPS that keeps you away from high crime areas.
The current market cap, or valuation, for HMNY is about $100K even though they have more than that in cash on hand. At $0.05 this is a bargain in my eyes. There is a chance the whole company gets de-listed from the exchange or declares bankruptcy, which means I could lose everything I put in. On the other hand, the share price could climb back over $1 within a few weeks or months and even see $6-$8 in the next year or two.
As the share price fell over several weeks I kept an eye out for a buying opportunity.
On 8/3 the price appeared to bottom out at $0.06 per share.
On 8/6 the price spiked to $0.18 on news of a new business model for MoviePass, $10 for 3 movies a month.
I sold 650 shares (1/2 my position) of RIOT for $6.75 each. Total sale was $4,384.19 a loss of $614.31, about 12%.
I bought 52,000 shares of HMNY for $0.085 each, total cost $4,429.90.
I could be dead wrong about this stock, please trade at your own risk.
A press release from 8/8 stated that the company was now current with all it’s filings. They had been behind for a while and many investors grew weary of the company because they took so long to get the proper filings in. The press release, not yet confirmed by regulators, stated that they were now current on all filings required by the SEC. They further stated that they were upgraded back to the OTCQB market. See below for an explanation of these markets.
OTC, over-the-counter markets, is where penny stocks live. The OTC market is divided into 3 segments in order to give traders and investors an idea of how risky the stock is.
The lowest is OTC PINK, also known as pink sheets and OTC other. These stocks are behind on their filings and no one really knows how legit the company really is. There are few requirements to be listed in the pink. Some are shell companies, some might not actually have any revenue, the pink are the wild west, this is the place to buy lottery tickets. Some might skyrocket while most will fizzle out.
The next tier up is OTC-QB. These companies are required to have a share price of at least $0.01, not be in bankruptcy, be current on all their filings and have a qualified sponsor. This is the tier that SGMD claims to be in.
The top tier is OTC-QX. These companies must have a minimum share price of $0.25 and market cap above $10 million. Filing and sponsorship requirements still apply. These are the least risky of the riskiest stocks.
All stocks have some risk, the NYSE has the most stable and least risky stocks. The NASDAQ is very tech stock heavy, so there is much more volitility here. The OTC markets are the wild west.
Last year the price spiked to $0.43 without prospects of an upgrade. I am currently holding 41,000 shares with an average price of about $0.15 each. My intention is to hold these as the price climbs and set a stop-loss order at $0.40 after it breaches this level. The price has the potential to reach $1 or more within the next year. I will likely be involved with this stock to some extent for the foreseeable future.
Final notes and Thoughts
The two penny stocks I discussed today are extremely risky. My personal investment in these companies is not advice to do the same. Please keep in mind that I could lose my entire investment in either of these companies.
On a personal note, I got a raise at my day job. My new take home pay is about $100 more per week. Beginning 8/3 I will be contributing an additional $50 per week to my trading account. That is now $100 per week to my trading account and $105 to my IRA.
Please follow this blog to see if I can make trading my full time job by the end of the year. Follow me on twitter for live trades. Thanks for reading and happy trading!