Mark Gomes the now infamous HNNY short -who BTW is a great guy – called the Moviepass wipeout every step of the way. Some would even argue that Mark helped accelerate the massive short sell that HMNY suffered. But I think the reality is HMNY and Moviepass suffered more from self-inflicted wounds.
Gomes has largely left the stock behind now and leaves a possibility that the stock could recover if it made certain moves to limit usage and become more of a niche play. In a recent videocast, Gomes stated that he believes HMNY could jump around wildly because of its very small market cap. He also stated that during this period after the big blockbuster season there was much more wiggle room for the company to manage its cash flow. Mark seems to have very low conviction that HMNY would end up bankrupt.
On message boards like Stock Twits, The number of confident shorts also seems to be going down. Both Message Volume and Sentiment ratings are rising as the stock stabilizes.
HMNY was sent to the “Dead Pile” of Wall Street primarily because the model they concocted did a lousy job of predicting how much usage and abuse a small number of customers could inflict on their overall business model. The company did not predict some customers would use their passes simply to use a clean bathroom in New York City, or to find a place to take a quick nap while escaping from work. Put simply Moviepass was being abused by customers – but it was part of the deal and there was little the company could do unless they backed off their original unlimited promise. The company was forced to change its ways to eliminate both abuse and fraud to stay alive.
Now that the abuse has been all taken care of things are starting to look brighter for the company and the stock is starting to stabilize.
Certainly, damage has been done to the brand, and that has been well covered over the past several weeks. But what remains is likely still a valuable asset. If the company does manage to avoid bankruptcy, the minuscule market cap that exists on the stock today will likely create opportunities for the stock to go higher.
It appears that the company is slowly restoring service availability to acceptable levels. More movies and times are being added, and many on social media are coming to the defense of the company and the new policies.
Tomorrow I will write more on how HMNY management could drive a serious recovery to the stock. Including:
- Possible Stock Buyback and why it would make sense
- Why an earnings surprise could be a massive boost to the company
- Why I think most outstanding share count estimates are off, and how that makes the Market cap for this stock lower than many think
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