Chapter and Lesson #4


“It is not the employer who pays the wages. Employers only handle the money… It is the customer who pays the wages.”- 

Henry Ford, Ford Motor Company 


When I landed the 2nd time at Microsoft, it was first as a contractor.  I had made up my mind that I wanted to work for the company fulltime, and I was going to do everything I could to land what they called a “blue badge” job with the company.   This terminology originates from the different types of employees who had different color badges depending on their employment status with the company.   Blue badges were for fulltime employees.   Microsoft has always had different color badges for temps, contractors, service jobs etc.    Blue was the gold standard, it meant that you were a full-time employee of Microsoft, with benefits, stock and all the nice, and some not so nice, things that go with it.    It took me about a year of hard work, keeping my nose to the grindstone and ears on the phone headset, and kissing a fair amount of ass to finally land my first full-time job.      

I came up from the bottom, so I had a chance to see the pros and cons of the perma-temps at Microsoft, and the ever-growing legions of contractors the company employs.  Microsoft employs temps and contractors for a few different reasons.  Mostly they want the flexibility in their workforce, it is more efficient for them than hiring fulltime people and having to deal with adjusting that workforce up and down.   For many of the contracted employees, this works pretty well, you can get a pretty decent paying job working as a contractor for Microsoft, and you can have a lot more flexible schedule.   As a contractor you typically can just focus on doing your work, you also don’t have to go to all the bullshit meetings Microsoft has all the time.   

A note about meetings and Microsoft. Microsoft is infamous for holding way too many meetings for just about everything, they have team meetings, group meetings, manager meetings, divisional all hands, pre-meetings, post meetings, meetings to plan more meetings and on and on.  It is an insane “meeting” culture, I don’t know if this has changed since I left.   I can only say that generally if you can’t stand meetings, don’t go to work at Microsoft.  You will have far too many of them and more than 50% of them are total and complete waste of time.   I regularly sat through meetings where there were 100’s sometimes 1000’s of people.  Almost all of them were totally useless and could have been done via a quick email or send a video around.   

For me, it turned out that the little bit of experience I had gained in Aerospace doing sales was useful for landing my first “blue badge” fulltime Microsoft job.  The group I was working for at Microsoft was looking for somebody who had some sales experience, but also some experience working in the Product Support Services group – which was the group I was doing the contracting job in.   That combination of experience landed me in a group that was ramping up a new team to sell a new “paid support” product from Microsoft that they were going to call “Premier Support” at that time.   The “premier” part meant that Microsoft was going to charge significant money to the customer to support their products. 

As more and more big corporations were installing more of Microsoft’s products, quite a few companies were starting to run important parts of their business on Microsoft, and they wanted Microsoft to have more “skin in the game” when selling their software to them.   Believe it or not, back in those days, Microsoft was considered more of a consumer software company, and big enterprise customers did not trust that Microsoft was truly committed to supporting big companies IBM for example was.

Microsoft had previously tried to avoid going deep into servicing customers.   It was expensive to service enterprise customers to the level they expected, and it was not considered a core competency of Microsoft.   IBM, HP, and a few others were considered more credible players in the service business in those days.

Microsoft was a disrupter offering a lower price more flexible PC solution, while others were offering expensive mainframe solutions with very high priced service contracts.   IBM had people inside of all these big fortune 500 companies, and anytime something went wrong they would take the bullet for the CIO who might be in trouble.   It made CIO’s very nervous to have a big deployment of Microsoft software and not have somebody at Microsoft who they could choke when things went wrong.    These dynamics made for the advent of the TAM – or Technical Account Manager at Microsoft.  The TAM was a named technical support expert assigned specifically to a company, or even to a specific department of a larger company.  If for example, a big bank had some sort of serious problem happening with any Microsoft product, they could call on their assigned TAM to make sure their problem was solved, even if that meant the problem required an engineering fix from one of Microsoft’s core development teams.  And a company could ONLY get access to a TAM if they had paid for a Premier Support contract.   It was a brilliant way for Microsoft to charge money to support their products, and customers actually jumped at the chance to get some individualized attention from the fast-growing software company based in the obscure NW corner of the United States.  

For me, this meant a new job was born!   My job was to sell these Premier Support contracts to some of Microsoft’s largest and most important customers.   I was happy and lucky to have a Fulltime spot with the company, many of the young people in the division I was being hired into were already “retiring” as they had enough money in stock options to cash in!  They could “call in rich” as they would say.   I figured if these lucky bastards could be retiring before they were 30 years old, I would be able to knock out enough stock options to be done before I was 30 as well! 

Microsoft was fortunate to have a lot of talent in their support group, they did a good job of working with customers and finding solutions to whatever problems they had.   Microsoft acted like an underdog in those earlier days, it tried to continually go above and beyond to make sure customers were getting good service and were happy and satisfied.   It was a fun group to be part of, and in that work, I learned a lot about what customers wanted from our products and services.  I would hear it first hand from the IT Pros who were doing the actual deployments of Microsoft Software in their environments.   These were the people whose jobs were on the line to make our software work at their companies, you learn a TON from these folks. 

Learning Lesson #4  When starting out in a big company, get a job where you are working directly with customers.   The experience you gain working directly with customers is invaluable for your entire career.  You will get more respect from future bosses, co-workers, customers, and partners if you live in the trenches with customers for a decent period of time.  It may not be glamorous or even all that fun at times, but the experience is the best thing you can do for your career.  I recommend getting the experience as early in your career as possible and stick with it as long as you are progressing in a direction you like.   There are TONS of jobs at big companies where you never actually talk directly to customers at all.  Avoid these jobs early in career.  Jobs that don’t directly touch customers are normally easily replaceable, outsourced, automated and early to be eliminated when times get tough, and they won’t give you the credibility needed to accelerate your career.   Companies are nothing without paying customers, every CEO and senior executive knows that.   Senior Executives have more trust and rely more on people in their organizations who have had a strong direct connection with customers.   And most Senior Executives get their positions because of their focus on customers throughout their careers.  

<<<On to Chapter 5>>>

HMNY Reverse Stock Split Panic

Several people have reached out to me asking if I think there will be a reverse stock split coming to HMNY – Moviepass.  Interestingly, nobody has asked me if they think it is a good or bad idea to do it.   I guess that is because most people simply assume a reverse stock split is a bad thing.

Now that the stock price for HMNY has sunk down under the $.40 range, some are fearful that HMNY risks being de-listed from the NASDAQ.  First of all, I think it is important to say right here, we are very far away from any chance of delisting.  Very very far away.  This is something that bashers on stocktwits talk about to scare people.  But the facts are that HMNY and MoviePass are not even close to this being a real issue.  There is a long process involved in delisting a security from the NASDAQ.   Here’s a quick background on that.

If a company fails to meet a minimum closing bid price of at least $1 for 30 consecutive trading days can trigger delisting. When this happens NASDAQ issues a deficiency notice to the company.

 If HMNY receives a deficiency notice it has four business days to file an 8-K form with the SEC or to issue a press release to announce the notice. At this point, HMNY has to provide the deficiency notice’s receipt date,  and an action plan to remedy the problem.  This has not yet happened.

If HMNY does receive a deficiency notice they have 180 calendar days to return to compliance.  After that HMNY has to achieve a closing price of $1 or more for 10 consecutive trading days during this period.  Because HMNY is not a tiny penny stock and it is widely held, it also is likely HMNY will receive a second “cure period” of 180 calendar days if needed to fix the problem.  They would have to jump through some hoops with NASDAQ, but extensions are not particularly difficult to receive for a company with the size and interest of a MoviePass.  

So – we are at least a full year away from ANY serious risk of delisting.  It just is not going to happen anytime this year, or even early next year.   And, luckily for investors here, we will know pretty well if MoviePass is going to make it or not well before that point.  So next time you hear a basher say HMNY is going to be delisted.  Just say – Please Really?   That’s just dumb.

OK – Now, back to the dreaded RS – or Reverse split.   This is just another scare tactic that shorts and bashers throw around on message boards.  And it is again almost all total nonsense.   The theory is that HMNY will have to do an RS, because the share price has fallen so low that the company will be forced to do a reverse split conversion of their stock in order to avoid delisting, and or, to be able to continue with more dilution (adding more new shares) to raise funds.

I think for folks that are newer to investing, it makes sense to clarify exactly what a reverse split is.   Here is how Zacks defines a Reverse Stock Split.

“Reverse stock splits boost a company’s share price. A higher share price is usually good, but the increase that comes from a reverse split is mostly an accounting trick. The company isn’t any more valuable than it was before the reverse split. Whatever value it has is just distributed over fewer shares of stock, thus increasing the price. A reverse split can sometimes save a stock sinking in value from a delisting.”

The important thing for novice investors to realize is, stock splits, be it reverse stock splits the decrease the number of shares,  or regular stock splits that increase the number of shares, has no impact at all on the value of the company you are holding, nor does a split in either direction have any impact on the percentage amount of the company you own.

A simple example goes like this.  Let’s say you owned 1,000 shares of XYZ Company stock at $.10 a share representing $100 of value – and that 1000 shares of stock represented 1% of XYZ Company.   IF XYZ Compay did a 100 to 1 reverse split, you would now have 10 shares of XYZ stock.  (1000 /100 = 10).  And the stock would be worth the exact same $100 value you had before. Also, that 10 shares would now represent the exact same 1% of XYZ Company it represented before the reverse stock split.   Further, the total value or Market Capitalization of XYZ company would be exactly the same as it was before the stock split ever happened.   The value of the company would simply be spread out across a fewer number of shares.  Remember Market Capitalization is calculated by the number of outstanding shares X the stock price.   

So why do people fear an RS at all if it does not change the actual value of their investment or the actual value of the company they are invested in?  One argument is that an RS is a sign of a company that is shrinking or going out of business or nearing bankruptcy.   Well if you read my blog, you know that I don’t think that HMNY or MoviePass is anywhere near going Bankrupt.  That argument just doesn’t hold water for me – they have no debt!  I also think it is a stretch to think that MoviePass is shrinking, the company is growing in the 3000-5000% range.  It is a growth company plain and simple.   You can hate the business model, and you can illogically fear bankruptcy.  But you can’t argue with the growth of HMNY.

Bears and bashers of HMNY will tell you that Ted Farnsworth will do an RS and just start diluting more shares again driving the price down, and the cycle will go again and again.   This argument actually has a little more merit and possibility.   If we arrive at the end of this calendar year at 5 Million Subscribers, and we don’t have a clear line of sight to breakeven, backed by management, HMNY would risk more dilution than has already been discussed by management.   If this happens, it will be bearish for the stock.   My firm view is that when MoviePass hits 5 Million Subscribers the revenue model works for the company and that we will not have to face an ugly pivot down the road.

If we do experience an RS is it a death knell?   The data says it no.

You might find it interesting that the data on stock prices post reverse splits indicates that RS’s are at worst irrellevant, and at best helpful.   There is a ton of scholarly studies on this topic.   I found this Barron’s article the most balanced.  The upshot from Barron’s was that a company that is going fail, will fail regardless of an RS, and the converse is also true.  If a company is going to succeed, it will do so post an RS just as well.

CNBC reveals a study that says Reverse Splits tend to actually end up being good for stocks.  This study was, however, was limited to only S&P 500 stocks, so there is an obvious sample bias here by not including penny stocks.

I think the data is clear enough.  The dreaded RS is definitely not a Death Knell, in some cases, it makes sense to do it, and it is likely a neutral move to make in the worst case.

Hopefully, this will help folks calm down a little bit and not panic over a potential RS.   I doubt it will happen to HMNY, and if it does, it is not the end of the world!!




Financial Freedom! Time to focus on it!

The original intention of my blog here was to talk about how to achieve and maintain financial freedom.    Many have found my blog because of my loud and proud bullish long stance on MoviePass and HMNY.  I have spent a ton of time on that particular topic and stock because I believe it offers a unique potentially once in a lifetime opportunity to quickly obtain a significant amount of wealth in a relatively short timeframe.  I continue to believe that is the case, but it is a risky bet, and it certainly is not a sure thing for achieving or maintaining financial freedom.

Financial Freedom means different things to different people.  To me it is not about flying around in a private jet, buying expensive luxury cars, diamonds, and other crazy things.   In fact, I don’t actually care about that stuff all that much, and most of that stuff buys more problems and headaches than it does happiness.  I will take you through my journey on a lot of the crazy things I bought over the years, and how I realized a lot of them were silly mistakes, that really just caused headaches.    Anyway, for me financial freedom is living a very comfortable life that includes a nice home, 2-3 nice enough cars, great vacations, a few nice toys,  and enough money that I can go out to dinner when I want, and drink a nice bottle of wine when I feel like it.

Most important to me,  I want to have my lifestyle without having to go to work every day for somebody else.   I like to get up whenever I want, got to bed when I feel like it, do whatever I want every day.  I am not lazy, in fact, I am far from it.  I love working,  I work on all kinds of things, investing, household projects, maintaining my toys, volunteering, etc.  However, I want to avoid working in a corporate office staring at a computer all day, or in meetings or doing stressful work for somebody else.   I want to avoid stressed out angy bosses, passive-aggressive – or just plain aggressive co-workers, that horrible smell of the office every single day – really I just want to avoid all of it, including the commute – no especially the commute to it every single damn day!  You know the drill, most people don’t really want to commute to a stressful job every day, and most people frankly hate their job, they go there because they have to, they need the money, they are likely in debt, have bills to pay, mouths to feed, and no line of sight to ever get out of the rat race.

The stats on job satisfaction in the US are nothing less than alarming,  In the most recent Gallup poll on the state of the American workplace, the stats show Americans are restless and would love to move on to something else.   Heres a few stats:

  • Of the country’s approximately 100 million full-time employees, 51 percent aren’t engaged at work — meaning they feel no real connection to their jobs, and thus they tend to do the bare minimum.
  • 16 percent are “actively disengaged” — they resent their jobs
  • Only 33% of employees are engaged in their job

There are thousands of articles, studies, polls that all point to the same conclusion.  The vast majority of America’s 100 Million workers hate their jobs,  they are stressed out, working more hours, and feeling like they are falling behind.  They wish they could do something else and would quit given the chance.   It is a sad state of affairs, and I am here to tell you, there is a way out of all of this.   It is called financial freedom, and it is wonderful.

There are a lot of different views on what it takes to achieve financial freedom, how much money you need, what level of lifestyle makes sense for you.  I have found that there are roughly  3 tiers of financial freedom that people generally accept, or desire.  In no particular order here are the tiers as I see them.

  • Living like a poor person, but realizing you are not poor.  
  • Living well – but not like a Rock Star
  • Living like a Rock Star

Living like a poor person is well covered by blogs like Mr. Money Mustache – this guy made a name for himself by living super frugal, and by his estimation, and compared to the world’s population, he does live very well.   He does all kinds of hardcore cost-saving measures, he drives older cars, rides his bike everywhere, pushes his own lawn mower, etc etc.   He budgets like a badass, and he has a big following.  He is inspirational, but truth be told, I could never live like this guy, it is just too hardcore for me.

Early Retirement Extreme is another great blog that does an inspiring job of making it while living on less.  This guy has a super popular post on how he and his wife live on $14K a year.  Great stuff, and lots of great advice here.  But again, I just can’t live like that.  Hell, the property tax on my home alone is around $6500 a year, so $14K a year, that is just not going to cut it for my plans.  But it can be done, people are doing it, and many of them are happy.  They are a lot happier than they were working their miserable jobs!

Living like a Rock Star – looks awesome, I am not talking about the fame or talent part, just the money part.  Unfortunately, though I think Notorious B.I.G. had it right – it really is- Mo Money Mo Problems.   Rockstar rich to me is defined by people who have enough money to own their own private jet.   I developed this view listening to Buffet, – Warren, not Jimmy.  Warren has often said that in America, the basic income can buy a life very similar to how he lives his life.  The big exception is that he can fly on a private jet, where ordinary Americans fly coach.   But in terms of everyday living, Buffet makes a good case, that the average American has access to the same things Buffet enjoys as part of his normal lifestyle.

People with Rock Star level money are simply not any happier than people who live well on an acceptable budget and stick with it.  You don’t need to look any further than the recent suicides of Anthony Bourdain and Kate Spade, that money and fame are no recipe for happiness.

I have learned that lesson in my life in spades, I worked around many very miserable multimillionaires while at Microsoft.   These were people who seemed to have it all, fancy houses, cars, nice families, “great jobs” and they were miserable.   They hated their jobs, or their spouses, or they were jealous of the guy or gal who was promoted ahead of them.  They were addicted to work, to the next big bonus or stock grant.  They were resentful, stressed out, and could never turn off the work.  They looked like they had it all, but none of it was under control.

So – don’t go for Rock Start level money.  A-it is unlikely you will ever achieve it anyway.  B- If you do ever get there, the chances are you will be miserable getting there, and when you arrive, you will realize, it was so not worth it!

Live well – not like a Rock Star  – This I think is the optimal lifestyle in which to live.   You want a nice home, in a nice and safe neighborhood.  If you have kids, you want them to have a good school to go to and to be able to help them get through college.  You want a decent car that is not embarrassing to drive.  You want to be able to go out to a decent meal and have a good bottle of wine once in a while.   You probably want a vacation or two each year,  and maybe a toy for a hobby.   You aren’t going to go all crazy buying stuff you don’t need.  But you also aren’t going to try and scrimp by living just above the poverty line in some clever way either.     This is where I want to help you get!

I have done it!   I achieved  “live well” financial freedom about 5 years ago.  Actually probably earlier than that, but I stopped being a corporate slave 5 years ago, and it has been nothing less than fantastic!

So with this blog, along with my posts on MoviePass, and a maybe a few other things.  I am now going to move to focus a bit more on how I think anybody can get to financial freedom, the steps I took, and how I maintain that freedom.

Now there is no beating around the bush here, it does take a serious stack of cash to get to financial freedom, and getting damn good income is a very important – actually essential- part of that plan.   I will be referring some to my book I am writing about my experiences at Microsoft as they relate directly to my experiences on how I generated enough income to get to financial freedom.   Listen, I am not that sharpest knife in the drawer, (you can see that when reading my posts – the bad grammar, spelling errors, etc) I am not the best looking guy you ever met either!  But one thing I figured out, was how to make money, and how to do it inside a big company.  How to climb the ladder, and how to squeeze every damn dime you can out of your working years.  My goal was to get as much as I could as fast as I could, so I could start enjoying my life on my terms.  I will step you through all that stuff.

The next step is keeping the money you have, and having that money work for you.  We will spend a lot of time on that.  I will tell you about the mistakes I made and saw others make, and try and help you avoid making the same mistakes.  I will also try and give some solid advice on how to keep your money train on the tracks.  And no – it’s NOT investing it ALL in Moviepass!!  🙂

I am also going to share my learning on what has made me truly happy in life, vs. things I thought would make me happy.   That has been a learning experience, and my view has evolved a lot over the years.  I don’t expect my views to align with everyone else, but I hope that some of the learning will be useful for some of the people who read this.

Now – I am going to bring this back to HMNY and MoviePass to close with.  I continue to believe a modest investment in HMNY could provide a young person with the rocket fuel they need to achieve financial independence early in life.   It is my sincerest wish that it works out that way.  Should the company fail, and not deliver the returns I expect, I still think there will be a valuable lesson for any investor here.  HMNY is one of the most complex, interesting, stock stories of this generation.  Everything they have done has been totally different than just about any company before them.

From the innovative business model to the completely unconventional way in which the company has raised capital, to the bizarre and interesting leaders, and the crazy intersection of technology, media, subscription and cinema businesses.  If you invest in this company, and really study and understand what you are invested in, you will have more education than any MBA could provide.   And it is that learning, and that experience, that will eventually help you achieve your own financial freedom, and set you on a path of what I hope will be a life of happiness.

Thanks for reading – and please come back as we tick through the topics together!




HMNY Naked Short Selling – What is it? Why it is Bad, And How Investors Can Fight Back

It is well known that HMNY has had a historically very high short interest, I have written about this a lot here, and how it’s expensive to short this stock.   I am not against short selling generally (however I personally never short stocks as I am not comfortable with uncapped losses) it serves a purpose in the market, and in some cases can provide needed increased liquidity for certain shares and market transactions.

I am however very against Naked Short Selling -with the intention to manipulate a stock price downward.   For those who don’t know what Naked Short Selling is – it is defined as.  “the practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale.”

So if you are already familiar with short selling, which is –the sale of a stock that the seller does not own. The seller makes such a sale by borrowing the stock in order to deliver it to the buyer.   The obvious big difference here in Naked short selling is the seller has not borrowed the stock needed for delivery when it is time to cover.   Traders can use Naked Selling to manipulate the price of a security by selling more shares into the marketplace than there are shares available to cover, thus putting heavy selling pressure onto the stock.

Naked Short Selling for the purpose of manipulating a stock price is illegal, and I believe it is immoral.  First I will talk about the illegal nature of it.

The SEC has made it clear in their ruling on SHO regulations “abusive short sale practices are illegal. For example, it is prohibited for any person to engage in a series of transactions in order to create actual or apparent active trading in a security or to depress the price of a security for the purpose of inducing the purchase or sale of the security by others. Thus, short sales effected to manipulate the price of a stock are prohibited.”   You can’t be much more clear than that, it is absolutely against the law to manipulate a stock to depress the price of a security.   There is no wiggle room on that ruling.

Now on to why I think it is immoral to attack a stock with naked short selling.  In America, we are trying to build new companies, to innovate with new technologies and new business models.  We lead the world across many industries, our technology, and our innovation as a nation is the envy of the world.  Many are trying to replicate, but none of have been as successful as the great old USA in terms of building long-term wealth and prosperity through hard work innovation and commitment to building new and better industries. This land of opportunity we live in, the rising tide that has lifted the boats for so many of us in this country, it relies on fair market and trust.   I believe it is wrong, immoral, and frankly unAmerican, to try and crush a company and manipulate its stock price for personal gain.

Unfortunately, I believe HMNY / Moviepass, has been a victim of Naked Short Selling to manipulate the stock price lower.  Before I get into that.  I want to talk about an example of where this has happened in the past, and how a brave CEO fought back against it.   I say he was brave because you must understand, it is very hard for a CEO to fight against the machine of Wall Street.  If a CEO turns on Wall Street, they know that it could likely be very detrimental to their company and their career going forward.  You don’t bite the hand that feeds unless you are very brave indeed.  It takes a real whistleblower mentality for a CEO to fight for what is right above what might just be good for him, or even his company.

Overstock CEO Patrick Byrne was just the type of CEO who was willing to fight against naked short sellers.  His story is amazing, and it highlighted that great difficulty and expense involved going after the Wall Street machine.  Way back in 2004 Byrne was upset with what he felt were vicious attacks on his company and his stock.  Byrne filed suit in California and even managed to get laws passed in his home state of Utah limiting large volumes of naked short selling and fining brokers who did so up to $10,000.00.   This, of course, infuriated Wall Street, and accusations back and forth intensified and lawsuits multiplied.  Wall Street continually poured cold water on Byrne, claiming he was a poor leader, and should not focus on short selling, but on running his business better.  Byrne claimed that big firms were spinning phony negative research through nefarious 3rd parties while making it look independent, all while naked short selling the stock, manipulating it downward, so they could profit from the fall.

Ultimately, Byrne settled all of the cases against the big brokers, the largest settlement was with Merrill Lynch who paid $20 Million dollars to end the misery.  Here’s a fantastic snippet from the Press Release Overstock issued when finalizing the settlement.  ”

“ feels the fight was well worth the effort.  Bringing this conduct to light has caused useful changes in the way the SEC regulates close-out requirements for stock trading. In short, Overstock believes the effort has helped reform the US Capital markets and lessened the opportunities for illegal stock manipulation.

Commenting on today’s settlement, CEO Patrick Byrne said, “Lao Tzu wrote, ‘In war’s victory keep to funeral ceremony.’  Though I am under no obligation to say so, I want to make clear that Bank of America had nothing to do with the behavior documented in this case. Even with Merrill Lynch, the individuals at issue are no longer employed there. I do not feel like bayonetting any more of Wall Street’s wounded today. Because we fought long and hard to get so many of the documents public, the true story of this decade-long battle can and should be told by an objective journalist. Res Ipsa Loquitur.”

Later, in an interesting twist, Goldman Sachs was fined $15 Million dollars by the SEC for not actually providing borrowed shares their customers thought they were receiving, thus putting Goldman’s own clients unknowingly in a naked short selling situation.  Goldman ultimately was settled out of the Overstock case.  If you want some very entertaining reading on the subject read the Press Release here.

Now mind you, there were plenty of Wall Street brokerages who loathed Overstock and their CEO for all this trouble and mischief caused by Byrne.  It cost both Overstock and the brokerages lots of time and money to deal with all of this fighting, and there really was no clear winner, other than maybe the lawyers who got paid a ton of money.   But the point here is that if we want or expect our boy Ted and HMNY to start fighting Wall Street, you can forget about it.   Ted needs Wall Street big shots one heck of a lot more than he needs retail investors to be happy.  Ted might be mad as hell about the short selling & naked short selling going on, but there is little he can do, he certainly doesn’t want to fight the same fight Byrne did.  Not only is it a big distraction, it costs lots of money, and the fight pits you and your company against Wall Street for years down the road.  So that just is not going to happen.

Now, why do I think that HMNY has been a victim of Naked Short Selling and manipulation?  Well, for the lawyers here or fans of law movies, we have the classic means, motive, and opportunity.

Who is my suspect?  Well, it is AMC of course!  AMC wants MoviePass dead, and while that may seem stupid idea for AMC, this is more about control of American consumers from an old-time puppet CEO in Adam Aron, who does not want to see a challenger company disintermediate his theater and come between AMC and the consumer.  MoviePass has already begun that irreversible disruption, and Adam is fighting mad.   It has been nothing less than all-out war with AMC, with Adam taking the unusual step for a large company CEO of blasting MoviePass at nearly every opportunity, even on AMC’s earnings call, even when AMC had clearly benefited from MoviePass related increases in attendance and sales revenue.  So motive is established and clear – AMC wants MoviePass dead!

Does AMC have the means to manipulate HMNY stock?  You bet they do, AMC is owned and controlled by Wanda group, Aron downplays the Chinese connection, but the facts are clear -AMC is a Chinese majority owned and controlled company.   In fact, the last 2 Board Chairmans have been appointed by Chinese company Wanda, and Adam Aron, is really just a bit of a stooge for Wanda, running the US AMC, while bigger things are happening back in China.

The newest Chairman of the Board for AMC is John Zeng, Zeng is also the President of Wanda Film Group, Zeng is the Chinese conglomerate’s most senior executive in charge of all film-related activity. That includes Wanda Cinemas, Wanda Films and the Qingdao Movie Metropolis in China.  So, yes, AMC is Chinese owned and run.  Aron takes his orders from Wanda.  There is no doubt about that.

Now back to the means.  Wanda has two very large backers, and in a  “you can’t make this stuff up” kind of way, one of them is none other than the Chinese government, and the other is Alibaba!  That’s right, AMC is actually owned partially by the Chinese government, let that one sink in just a bit.  The pockets behind AMC are let’s say, as large as the mother earth itself.

Now, do you think for even a minute that the Chinese like to play fair when a little startup American company is starting to mess with one of their investments?  History proves that China will do what it has to do to protect its interests.   Yes- AMC has the means to naked short sell HMNY into oblivion should they want them dead, and we have established already, AMC wants MoviePass dead.

Now, onto the opportunity.  Just because AMC wants to kill AMC, and would love to see the company stock shrivel up and die, and they have the money to do it, is there really any opportunity for AMC to make that happen.  OF COURSE THERE IS!

Naked short selling really is very loosely monitored by the SEC.  As you have seen with the Overstock story, even if a company suspects it is happening, they are reluctant to defend against it, because they don’t want to risk pissing off Wall Street.  Further, short sellers have very little reporting requirements.  Have you ever noticed it is almost impossible to find out who is shorting a stock and how much?   To make matters even worse, institutional sellers use something called dark pools, which are trades handled outside of the major exchanges to conduct short selling arrangements where there is total lack of any transparency.   And of course, the big firms like Goldman and Merrill are complicit in all of this, because they don’t care if they can make some quick money off doing a short sell deal, even if they neglect doing their part in providing the borrowed shares.  (Note: I am not saying GS or Merill is doing this here, just using them as examples).   So, the opportunity to commit the crime is there, AMC could easily utilize institutions, dark pools, and even offshore traders to execute all kinds of crazy short selling activity.   They could do it through connections via Wanda, Alibaba, or the Chinese Government.

So there you have it, Means, Motive, and Opportunity on manipulative naked short selling.   AMC has them all at their fingertips and has been unusually vocal about it.  What or who could stop them from carrying it out?  The SEC! ha fat chance! They are slow, understaffed, and have nobody complaining to them about it anyway.   

Unless… We long shareholders of HMNY start to complain.  We are the only party in this mess who can fight back!   We have nothing to lose, and everything to gain.   Not only does it serve us longs financially to get the SEC off their butts and start investigating this debacle.   It is our moral duty as Americans to fight against the evils of naked short selling, trying to destroy American industry and ingenuity!   To not complain to the SEC about this would be – well – downright unAmerican!

So I urge you go to the SEC website, fill out their complaint form, they have a specific area in the form identifying naked short selling, let them know you stand against this, and if you have lost money on it, let them know that too!  If they hear from enough of us, they will act!

Heres the link to file your complaint

Let’s fight this together.  Do it for your pocketbook, do it for your country! Do it for your children!   FIGHT BACK!






My Quick Take on MoviePass Films

Because it is summer time, and I am a retired guy who likes to enjoy the beautiful weather in the Pacific Northwest, I am going to be making less frequent updates to the blog, and I will be keeping them a little shorter.  If something super significant happens, I will write a bit more about it.   You get what you pay for here.  And unfortunately, so far, that has held true for the entry point on MoviePass stock.

I will repeat again.  I am a buy and hold type of investor.  I don’t think you should buy any stock if you can’t stick with it for at least 3 years, and I prefer 5 years or more.   So as to the daily and weekly swings to HMNY and MoviePass, I don’t like them any more than anybody else.    And they are not meaningless for HMNY given they are selling shares to finance the scale out of the company.   Anyway, I remain long, until the story changes to the point where I don’t want to be invested in a company anymore.

OK – On to the MoviePass EFO – MoviePass Films news.   I will start here, obviously, I was hoping for Atom Films to be the acquisition.   I personally see a more immediate benefit to that marriage, and I was disappointed that was not the news.   I was wrong – again – on my prediction here.   I have found that it is fairly difficult to predict what HMNY and MoviePass are going to do next.   That keeps them interesting, but also I think makes things a little frustrating for investors.

Overall, I think that this arrangement is a solid move for both MoviePass and for EFO.   MoviePass knows that it wants to get into the exclusive content game sooner than later, this allows them to enter into that market, without expending much at all in the way of capital.   For EFO this deal makes sense because it helps them to put butts into seats for their movies, even if the movie is not reviewed well, it gives it a chance to find an audience via MoviePass audience and marketing.

Gotti will be the first really good test case for this phenomena.   Gotti, so far, has not been super well reviewed.  It got a couple real negative reviews at Cannes, and it was pretty risky to do the reveal there anyway, as Cannes is a snob fest, and the reviewers there tend to try to one-up each other on intellectual snobbery, so revealing a mob movie, that does not go down the high brow liberal reviewer path, is likely to have you end up with a long dissertation type review on how the movie missed the opportunity to make a bigger social statement.  Or some such thing.  The point here, the movie did not get a great set of reviews.   And to be honest, the movie has taken a long and winding road to release, indicating that even the studios and distributors have had at least some reservations about how well it might do at the box office.     So a deal was struck with MoviePass to be a partner in the distribution of the film, and, MoviePass, as part of the deal guaranteed promotion to their subscriber base.   This is how MoviePass got the deal with Orchard and American Animals as well, they ponied up their subscriber base as part of the deal.

This is why I have been saying for months now – that scaling up the audience and the subscriber base is the most important asset that MoviePass can build.  When you have a large audience, AND you have their personal information and moviegoing habits, AND you have their credit card number, AND you know what theaters they go to, AND what films they like, it is INCREDIBLY valuable!   As investors, we are now starting to get some of that value in the form of exclusive content.   Essentially EFO has made a deal to with MoviePass to extract some of that value.  The deal basically goes like this.

Future movie script:

MP: Hey – we have all these subscribers that love movies, and they subscribe to MP so they are not afraid to take a chance on a movie, even if it might be a bad one based on a review.  In fact, we have some subscribers who love bad movies, just because it is sort of fun.  And there is literally almost no friction to getting them to go see your movie.   We want to make money off of getting people to go to more films, and we would like a piece of the action as we make it happen.

EFO:  Well – we try really hard to make great movies, but sometimes they turn our just OK.   Sometimes we get burned by the critics, and those guys are like sheep, a couple bad reviews, and all reviews seem to go to shit – and there goes that film down the drain.  But we know a lot of people like our movies, they like our guys like Stalone, Wahlberg, and Travolta, even if the movie has a less than stellar review, we think there is a big audience for it.   But we need a bigger audience to get into more theaters and to stay in for longer windows.

MP & EFO – Hey – what if we teamed up the MP audience with EFO’s movie-making machine and made magic together?!    YES!

How will we do it?

EFO – well we have this big library of content, and we can’t just give that away into a new company.

MP – that’s fine, but down the road, we see value in that library and would like to have access to it so we can monetize it against our audience in different ways.  How about you give us an option on that?

EFO – Sure we can do that.

MP – How about we band together for all the new films you guys are going to make, and we share that 60/40.

EFO – I am insulted, we make the movies, we are Hollywood big shots!  We want more!

MP – OK fine – how about we take 51% and you take 49%.  We both will thow in some cash, and we will throw in some stock to sweeten the pot for you hollywood big shots.  We want you to be incented to stick with us for the long haul anyway.


So now we have MoviePass films.   Content is still KING!

Think about every company that started off in the content delivery business and figured out that it made sense strategically and financially to enter into the content creation business.

HBO – NetFlix – Amazon – Showtime – Microsoft – even Apple has entered the exclusive content business in one way or another.   They do this in order to continue to grow their huge audiences and subscriber bases and to offer unique content that is exclusive to their brands.  In some ways, it is a necessary evil of being a major player in the media business.    Content creation is expensive and can be risky, but without it, you are much less relevant to your subscriber base.

Now – read the Press Read  carefully:  I will insert a few comments in it here:

LOS ANGELES–(BUSINESS WIRE)–Helios and Matheson Analytics Inc. (Nasdaq: HMNY) (“Helios”) announced today that Emmett Furla Oasis Films (“EFO Films”) has granted Helios the exclusive option <<<Read -we have the exclusive right to their old stuff and new stuff, it’s an option to work with Hollywood Big Shots – we don’t have to take it >>> to acquire the entire film library and current production slate of EFO Films. The EFO Films library includes acclaimed titles such as Lone Survivor and Broken City and features A-List actors such as Mark Wahlberg, 50 Cent, Sylvester Stallone, Bruce Willis, Arnold Schwarzenegger, John Travolta, Denzel Washington, Nicolas Cage, Robert De Niro, Al Pacino, Kate Bosworth, Leelee Sobieski, Anna Kendrick and Ellen Burstyn. The EFO Films library also includes the upcoming titles Boss Level starring Naomi Watts, Mel Gibson and Anabelle Wallis, 2Guns, Escape Plan 2 and Escape Plan 3 starring Sylvester Stallone and Dave Bautista, The Irishman starring Robert De Niro, Al Pacino and Jesse Plemons, and The Iconic Video Game ASTEROIDS by ATARI, including others in production, with the goal of 12 to 15 films over the next year.

“To have such a well-known, quality production company join forces with the Helios/MoviePass group of companies is truly remarkable”<<Read –  we are psyched that we are big enough and have enough momentum that Hollywood big shots are willing to partner with us to do deals, not everybody gets to do this!! >>>

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Helios also announced today that it has formed MoviePass Films LLC (“MoviePass Films”) with Emmett Furla Oasis Films (“EFO Films”). Helios owns 51% and EFO Films owns 49% of MoviePass Films. MoviePass Films will focus on studio-driven content and new film production for theatrical release and other distribution channels. Hollywood veterans Randall Emmett and George Furla will serve as Co-CEO’s of MoviePass Films; MoviePass Films’ Chairman of the Board will be Ted Farnsworth. Mitch Lowe will hold a Board seat as well, and Farnsworth and Lowe will work together day-to-day to execute the strategy between MoviePass and MoviePass Films. Terms of the deal were not disclosed, however both parties agreed on a payment in the form cash and stock.<<< Read – we are setting up a new company together so we can make movies and promote them to MP sub base – we are BOTH putting in money and stock to get the thing up and running>>

Helios plans to capitalize on the unique capabilities of its subsidiary, MoviePass Inc. (“MoviePass”), to market future MoviePass Films productions to millions of MoviePass subscribers and moviegoers everywhere. MoviePass Films will pay MoviePass for any marketing services provided to market MoviePass Films productions. MoviePass Films will own and control all revenue streams from theatrical release, domestic and foreign distribution rights, streaming, retail, DVD sales, transactional sales, etc.  <<<Read – MoviePass Films – the new company, will still have to pay MoviePass to market the new movies – we can’t just give it to them for free.   But I bet they get a sweetheart deal!   MoviePass Films gets all the revenue from the Movies, but then 51% of that is owned by MoviePass, so MoviePass has controlling interest in the new company, and gets their money when it rolls in from the new movies they make”

“To have such a well-known, quality production company join forces with the Helios/MoviePass group of companies is truly remarkable,” << Read- again even we are surprised we can get Hollywood Big Shots to partner with us so early in the game, we are stoked!!>>>>said Mitch Lowe, MoviePass’ CEO. “Since we began disrupting the movie industry with our unprecedented low-cost movie theater subscription service, MoviePass™, we have envisioned owning and developing our own studio content and using the power of our several million subscribers to bolster the success of the box office for our films. I believe MoviePass Films will accelerate those efforts and demonstrate the power of MoviePass to drive movie theater attendance and downstream sales, for the benefit of moviegoers, movie theaters, studios and the film entertainment ecosystem as a whole,” concluded Mr. Lowe. <<<Read – we were always going to do this, now we can get started right away – watch as we become an entertainment juggernaut!>>>

Helios believes its acquisition of the current production slate of EFO Films and the leadership of MoviePass Films by veteran producers Randall Emmett and George Furla will accelerate Helios’ plan to produce its own movies for theatrical release, create new revenue opportunities for MoviePass’ marketing services, fill theater seats throughout the United States for MoviePass Films productions to the benefit of exhibitors, and enable MoviePass Films to participate in box office and downstream revenues from its proprietary content.  <<Read – we are saying it again – this was always the plan, and now we are going to show you how we can make money up and down the entire value chain, this is why we needed to spend money to build scale, and this is how we are going to kick some ass making money while we get people back into the movie theaters.   We are not stupid like AMC, we actually believe it is better to have more people going to the movies, and find more ways to make money on that.  It’s a different strategy than just making people pay more money for tickets and rip them off for popcorn.  But we like our chances>>>

“To do a deal with Helios and MoviePass is epic for us,” said Randall Emmett of EFO Films. The MoviePass™ subscription service has totally disrupted the movie industry, for the better. When we worked with MoviePass Ventures on the movie Gotti, starring John Travolta, which premiered at Cannes and is set for release this coming June 15 – I immediately saw how revolutionary the MoviePass™ service is. I have never seen any player in our industry move so quickly and gain such a large following in such a short period of time. What impresses me the most is that MoviePass can guarantee box office attendance, which is a game changer. I don’t believe anybody else can do that,” concluded Mr. Emmett.  <<<Read – I am a Hollywood big shot, and I think MoviePass is a game changer because they have a direct connection with the consumer, and they can get people out to see movies with no fear.  Mitch is a smart guy, and he figured out this Movie Insurance idea, and now people are going to movies like crazy people!   Where have these guys been all my life!   It is a new dawn for movie makers!>>>

“Ever since we co-acquired our first film with MoviePass Ventures, American Animals, which is set for release June 1, we’ve been looking for an opportunity to acquire and produce studio content on a larger scale and prove the power of the MoviePass™ service in the process. We believe we’ve found that opportunity with Emmett Furla Oasis Films. Along with MoviePass Films, MoviePass Ventures, our studio driven production company and our independent film investment division, will play an integral role in our business strategy,” said Ted Farnsworth, Chairman and CEO of Helios. “We believe the track record of Randall Emmett and George Furla over the last twenty years speaks for itself. For MoviePass to have the opportunity to jump in the middle of new high-caliber productions that are already underway, becoming a part of that, is more exciting for Helios and MoviePass than I ever could have imagined,” concluded Mr. Farnsworth.  <<<Read – When we used our audience size to get a piece of the action on American Animals, we figured out that we have a big idea here, we could make our own damn movies and sell them.  But then we also knew that we didn’t know how to make movies, so maybe we could find a Hollywood big shot that saw our big idea and would partner with us.  EFO said yes!  and we got married!>>>

So that might friends is how to read this deal.   For the rumor mongering fear generating short sellers they will howl that this is too expensive, that they are giving up a ton of money to this new venture or that a big additional dilution is certain because of this new deal.   That is all horse pucky.   I am certain that this cost HMNY very little to set up this structure.  Both sides protected themselves adequately.   This thing is obviously written with a prenuptial agreement.   Hollywood knows divorce all too well.

So I think it is a great start and could end up serving MoviePass very well.  Like all things, it has some risk that it won’t work.   You can’t push too many bad movies, because people realize their most valuable resource is time, and even for free, a bad movie is still a bad movie.   Also, there are a lot of egos in all of this, and these guys tend to be real bastards when things don’t go as planned.  So any kind of drama could unfold in the future.

I think the deal works well if MoviePass doesn’t overdo it pushing films that people don’t want to see.  That can be achieved be staying closes to the customer, using data to suggest films that MoviePass knows you might like.  This is where the data, and soon the integration of reviews into the MP app becomes critical.    If MoviePass can elegantly promote specific movies to specific subscribers and get a piece of the action through the entire value chain, while delivering on their strategic vision of bringing people back to the theaters, this will turn out to be a very positive deal.

Maybe ultimately we will say – HMMM how did that do that?