HMNY – The Stock That Makes No Cents or Sense – Some Fun With Numbers

636 Million shares -Market Cap $18.5M

It was another painful week for HMNY shareholders.  The completion of the total stockholder wipeout seems almost complete.  This truly is the stock that never makes sense or cents.

The numbers are all insane but can be fun to think about and play with.  Let’s look at a few of them together!

  • The company is currently valued at approximately $18.5 Million Dollars. You could own all of  MoviePass for about the same price as this 2 Bed 3 Bath Central Park Condo .  Interestingly – there are 194 properties listed in NYC that are now more expensive than Moviepass – or HMNY the entire company.
  • There’s the possibility that approximately 4.5 Billion more shares could be sold into the market.  That would be enough shares to give every single person in China 3.26 shares.
  • If the management did unleash 5 Billion Total Shares – And the stock maintained its current price of .03 cents per share – The Market Cap would be $150 Millon Dollars.  That amount could afford you this nice yacht!
  • If all of the remaining 4.5B Shares were dumped at .03 cents – it would raise only $135 Million dollars.  Not chump change, but that’s a lot of shares to get that kind of money, It is at least enough to buy 13 Million more Movie Tickets! 
  •  The last Bruce Willis film “Death Wish” Grossed $48.6 Million at the box office.  And apparently, it is doing great downstream – helping MGM boost domestic in-home film revenues higher.  The film was a flop with critics but will end up making a nice profit over its total lifetime.  With a  budget of $30 Million, the film will likely profit above the $20 Million – or more than the total price of buying all of MoviePass.  

Could Bruce save MoviePass with 10 Minutes Gone – or will MoviePass be gone in 10 Minutes?  We don’t yet know.

MoviePass is an enigma.  A riddle unsolved.  It’s cheap and it’s very expensive.  The numbers are huge, and they are also so tiny.  It is dead, and it is very much still alive.

 

Moviepass Stories Have Become the Internet’s Clickbait Machine – It’s Britney BITCH!

I worked for one of the largest websites in the world for many years. MSN.com – we had over 100 Million customers visit monthly. One thing we got very good at, and I hate admitting it, was using clickbait titles and pics to lure customers into our article pages.

The process is extremely easy. Pick topics that are hot in search, create tantalizing sensational headlines, and watch the traffic spike up. Hell, I am doing it with this blog right now!!… it’s hard to quit old habits!

The best headlines are sensational and negative. Nobody wants to read about good news. The best photos are sexy, or scary.  That is why TV News always leads with car wrecks, fires, shootings, and scandals. Nobody wants to hear about great teachers, or doctors saving cancer patients, or a social worker helping somebody get back on their feet. That’s not NEWS that’s boring!

People are weird social animals that can’t look away from god-awful things. They run to see a fire, they crave a good 48 Hours or 20/20 informative murder porn episode. It’s human nature. We are run by fear and flight. And we desperately want to know of the latest tragic thing that happened immediately, and we wonder in fear if it will hurt us next.

On MSN, a great headline is something like “Britney Spears life in shambles after tough divorce, and running out of money”. That would be a clickbait banger! Clicks galore with that one.

One thing you need to know about the online-only business press. These sites are desperate for traffic – they all operate on a razors edge financially, and the competition is brutal. They play the clickbait game as hard as they can.

They also love free and cheap content. This is why you see stories like the “users complain they can’t cancel Moviepass” pop up all over the pace in succession in one day. In that example, Mashable was the first to do the story. Mashable and Buzzfeed are the two original clickbait machine businesses.

Literally, it is their business model. They look for and write headlines that they see in trending topics in search logs from Google, they then try and find some scandal and look for ways sensationalize it.

They won’t do any real research on the topic, rarely will they bother to verify the validity of the story at all. In fact, reporting the rumor is considered good enough – it’s actually great if you are trying to drive traffic because it will get people to argue about it on social media!  That is also great for clicks!.   The primary metric management uses for success is “did people click the headline” from Facebook, Twitter, Instagram or whatever big traffic source they are trying to suck from.

If you work at one of these places your job is to write as many “clickbait” headlines and stories you can in a day. And you are measured by the audience you pull in.  It’s a nasty business- and it requires playing on human emotions, and knowing how to work the click.

These sites act like sheep- if Mashable looks like they got a story that is “clicking” the other sites like Vox, Buzzfeed, Business Insider, The Street, Market Watch etc. will do a “story on the story” so they can get some of those clicks. It’s competitive every day. And they don’t want to lose out. And the cheapest story to go with is the story somebody else has already written. They don’t bother to fact check anything, they simply say. “Reported by Mashable” users can’t cancel Moviepass. Speed is everything, the stories are dead in just a few hours.  Here’s what the media pile on looks like 24 hours later!  135,000 results!  BOOM just like that.  And poor old Mashable who “broke the story” – they are lost in the crowd.  It’s a brutal game.

It’s also a true Journalism nightmare. But these people are not journalists. As I have written about here before, we had deals with a lot of these sites at MSN to syndicate their “content”. So I have actually visited most of their offices. It is fascinating to see it. The scene is a bunch Journalism or English majors interning or just out of college, they make next to nothing and work in near-sweatshop conditions, pumping out stories as fast as they can. Quantity and click-ability rules over quality. It’s scary to think about how inexperienced these people are and really how little most of them know about the topics they write. But it’s a business. And it is what it is.

So it caught my attention today when Moviepass mentioned this little bullet in their Momentum Press Release. (Which. BTW- was great to see! And has some great nuggets in it)

MoviePass is one of the most widely read business stories of 2018.

It reminded me again, the online financial media is almost totally useless.

Read every headline and story with a huge grain of salt. The chances of accuracy are very low.

Good news, unless it is a HUGE upside earnings type story, generally is not covered. Nobody will click on a headline that says. “Company executing well, new customer service team is improving”. That is BORING!!  And definitely NOT clickable.  If one of my interns came to me with that headline, I would slap them across the face with my mousepad!! Give me something people will click on you stupid rookie! We are trying to run a business here!

As Teddy said today in the Fox Business interview, Moviepass is one of the hottest brands of the year. Everyone is talking about it. With that heat, comes the fire of clickbait. Expect Moviepass to be the Britney Spears of the financial press for at least a few more months. Longer if it takes off. Shorter If Britney dies. But if death comes, that will certainly be the click of the day!

HMNY Earnings… Miss…or .. Miss-Understanding?

My quick take on the little 10Q earnings fit this evening.

But before we get to that, I saw MI 1005 – or whatever it is called – starring that aging Scientologist – whatever his name is – with my MoviePass card today.

It was sort of fun, but by about 2/3rds of the way through it I found myself hoping it would end soon.  How many chases, explosions, karate fights, rubber mask double cross scenes can you really take in one movie?  I had to go to the bathroom once during the show and was happy to take the break and let the movie keep running. When I got back to my seat I whispered to my wife, “what did I miss?”  She said chasing and fighting with that annoyed look.  That was fine by me, there were still 35 minutes more stunts, jumps, fights etc to go…

Even the special effects were at times annoying.  I happen to own a BMW 1200GS, like many of the bikes featured in the movie – the same bike the cops chase Cruise on.  Ethan Hunt’s bike is an R nine T – same engine I have on my bike.  The movie makes these BMW bikes sound like they are winding up like a Suzuki GSXR 750 with racing pipes on it.    It is like taking a Mercedes SL Class and making it sound like a 86 Honda Civic hepped up by some high school kid.  It’s ridiculous!

Also a little crazy was the after-hours spazz out over the Q10 released today.

Seriously what were people expecting?

This is a company that has been EXTREMELY transparent about their cash burn, and has been hanging on by a literal thread taking on loan shark like bridge loans to stay alive over weekends while their main product was melting down.   Did people really think the numbers were going to be good?

And were they really that much worse than expected?   In some areas NO, in some areas maybe a little concern:

Gross Profit was -$105 Million.   Yep they burned a shit ton of cash.  We knew that!!!  It was not new!!  Does nobody remember this?

Directly from the 8K on June 21st the company said.

“From May 1, 2018 through June 15, 2018, we acquired approximately 545,000 new paying subscribers. Due to our greater than anticipated subscriber growth in May 2018, our cash deficit for the month of May 2018 was approximately $40.0 million and we anticipate our cash deficit for the month of June 2018 will be at least $45.0 million due to significant subscriber growth and strong box office results of recently released films. As the MoviePass subscriber base increases rapidly, and as we increase our investments in movies through MoviePass Ventures and MoviePass Films, and make other acquisitions, our monthly cash deficit will continue to increase in the coming months.”

So May and June alone were already announced as -$40 & -$45 Million.  That is -$85M we already knew about for those May and June.

That logically means that April was -$20M —  For those who don’t get the math.  (April -20 + May -40 + June -45 = QTR -105M) . Were people hoping that April was somehow a way better month?  That seems totally illogical to me.  The GP is pretty much exactly where we thought it was going to be.  And all of this crazy Cash Burn was before the big changes really started coming in. Surge Pricing didn’t start until July 5th – or thereabouts.

SG&A actually came in lower than I have modeled at $20.5 Million.  That is pretty lean for a company of this size.  I had $36 Million guesstimate in there.

The $72.4 Million in Subscriber Revenue seemed like a pretty good number to me, particularly when the company is sitting on $65.3 Million of Defferred Revenue.   (This stuff gets a little complicated.  But Deffered Revenue sits as a liability until it is recognized over the life of the subscriber as Revenue.  This is what makes yearly subscriptions nice, it allows for smooth revenue delivery over the period of the contract.) .  Last QTR the company did $47.1M in, so it had a big jump in sub revenue in the QTR.

The biggest disappointment in revenue – and I don’t know how this number could come in a bad as it did was the Marketing and Promotional Services number.  It was actually LOWER than last QTR!  It came in at a lousy $935K vs $1.44M last QTR.  That one needs some explaining from management.  This is the area where the profits were supposed to come from.  This was the reason behind buying Moviefone.  This is supposed to be the area where they are monetizing their data, and studios were going to pay money for it!   To me, this smells like really bad execution.  And if I had once big worry about this ER, this would be it.  Studios don’t seem to be willing to spend money with MoviePass yet, and the theater deals are coming too slowly as well.  The industry seems to be giving them the finger.    That will have to change, if it doesn’t, that makes the story much more difficult.

That brings us to the next worry wall from earnings.   New panic has set in over the dilution – wait – really – Ted is going to dilute the stock?   Wowser – that fear was new…  OK – sure.  Not really no.

But I think folks have had a very legitimate worry that Ted is having a little too much fun playing Hollywood Movie Mogul, and he is funding his good times with stockholder’s money.   Ted and Mitch have said that they would be buying films multiple times in both interviews and in SEC filings.  They belive exclusive content can differentiate the MoviePass experience and bring added revenue to the company- from Box Office receipts to downlevel revenue streams from content DVD, streaming etc.  That is what MP Films & Ventures was all about.

The problem is, stockholders don’t want to hear about spending more money on risky investments in films while the company is hemorrhaging cash.  That is understandable.   Here I actually thought the news was pretty good.  In the QTR the company spent ONLY $2.052Million “Net Investments in Films”.   That is a LOT less than I think people thought they had spent on Gotti and whatever that other forgettable heist movie they funded.   I will write later on how I think they are getting parts of these movies on the cheap by guaranteeing audience delivery.   But at least up through this QTR, the fear of Ted going totally crazy on Movie Spending to impress his new Hollywood pals seems to be largely under control.

Is there other stuff to worry about with this ER, probably.  But nothing that stands out as totally unfixable or way out of line from what we already knew.

The biggest head scratcher for me is why are the Studios not spending more money with them?   This thing does not work well without that piece.  They need to find a way to work with Hollywood much better.  Mitch has mentioned this in his last set of interviews and said it on Cheddar that they have found a better approach to working with Studios.  Let’s hope so!

As for cash burn, dilution, and Ted going nuts buying movies.  All of that looks like it is about to turn much more positive starting tomorrow with the big 8/15 change over day.

People are freaked out about the new share count of 636M.  That is a lot of shares, and it is an insane amount of shares pre-split.  Some 159B.  If you gambled before the split, and I was one of those suckers – you likely never going to see that money back.  But there is some interesting math you can play with where you could get a portion back.  But in all likelihood, we will never get a dime a share back. And even that would be good at this point.

At .03 a share – we are back to the company being valued at basically nothing. $19M Market cap against 636M Shares Outstanding.

Again – this was not new news.  5B shares had already been approved.  And we all knew that ATM was the only source of funding.  Didn’t we?

Consider a scenario where the stock goes down to .02 cents and Ted goes all the way and floats the full 5B shares he has available.  Maybe he can raise $75 more dollars doing that.   That would give the company a $100M Market Cap.

So basically what all this means is that the company has to live off what it catches within the next few months.   It literally has to break even fast.  If it doesn’t, well- I suppose crazy Ted could try another RS.  And see if he can play the game one more time.   If he does that.  It is another easy short.  And at that point might as well hang it up.

I remain optimistic.  And I don’t frankly give two shits what the bears are saying about the stock.   I think the new change over can work to get to breakeven, and I think the stock is priced to go out of business.

That said – it is gambling, and if you can’t afford to lose it, don’t put it here!!!

 

 

 

 

Tomorrow is IT! 8/15 Change Over Day!

Tomorrow will mark the beginning of the end of the Moviepass slaughter. The hogs will be eliminated. The Wall Street crowd will see impressive stickiness to the service, sub numbers will be surprisingly resilient.

It will be a long battle still, but the good guys are going to win. The service will be freed from the socialists who were bringing it down. Cash Burn will dwindle toward zero. HMNY will no longer be hostages to the thieves of Wall Street.

The tables will turn quickly. When you don’t need money, everyone wants to loan you money. The dilution will slow to a trickle. The shorts will cover. The greed of Wall Street will kick into high gear snapping up shares on the cheap.

The snarky nasty media will change their tune as fast as they did the time before. Sins of the MP past will be forgotten.

Theaters starving to get that good Moviepass hit will come to partner. Films looking to buy an audience will come knocking. The platform will grow. Exclusive content and experiences will excite the masses. A new entertainment company will be born.

Mark tomorrow on your calendar.

8/15 Change Over Day!

It shall be remembered by all!

HMNY Naked Short Selling – Walked Down Share Price – Total Manipulation

It is easy and plainly obvious that HMNY has been a victim of a vicious Naked Shot Sell attack. The SEC has been notified- and as of yet has done little or nothing to stop it. Why? The SEC is weak and under-resourced to deal with the 100’s of Naked Short Attacks that happen every year.

Here’s a site that explains in extreme detail what Naked Short Selling looks like. Ask yourself, do you see similarities with HMNY?

Here’s a few quotes if you don’t want to click over.

Only a motivated enforcement agency with subpoena power and an accompanying powerful enforcement infrastructure can prove that naked shorting is at the heart of an extensive stock manipulation scheme. However, I believe that the observational evidence is overwhelming that naked shorting practices are widely used to manipulate the stock prices of emerging biotechnology companies as well as many other small and large companies. Unfortunately, naked shorting is an investment variable that investors must understand if they are going to make investments in the emerging biotechnology space in particular and the equity markets in general…..

….started developing my website and its content about four years ago. As I gained more experience, I was startled to find that there was another very important force at work on these companies that was apart from the fundamentals that I was focused on. One would expect a high level of volatility in the stocks in which I specialize. However, this could not always explain the demoralizing collapse of a meaningful number of stocks that I am involved with following some news event.

Suddenly and without a major change in the fundamental outlook, I would see stock prices cut in half in a short period of time. During this time there was invariably a steady day by day price erosion (naked shorting at work) accompanied by an unending stream of contrived negative news flow that was demoralizing to me and other investors.

In order to give more insight into what a naked shorting attack might look like, I have put the predictable elements of a typical attack based on my experience in living through a number of them on separate companies.

• Shorts like to target emerging biotechnology stocks that are engaged in high risk drug development and are not widely covered by quality research analysts.

• The initial and subsequent attacks are almost always triggered by some news event. Obviously, the shorts seek out negative news or an event that creates uncertainty. However, sometimes an attack can be based on a positive news event which the shorts spin to make it appear negative.

• Using the ready platform afforded by the internet and social media, a blogger associated with the shorts goes to work with a negative interpretation of an event. These are usually not sophisticated analyses and are usually limited to one or two pages of text which is invariably one-sided and unbalanced. These are meant to provide “intellectual” reasons and cover for the short attack.

• The most prominent of these bloggers usually have no backgrounds in biotechnology analysis or expertise in the science. I believe that in many cases, hedge fund employees actually write the articles which are cut and pasted into the comments of these bloggers.

• The heart of the naked shorting scheme involves a group of hedge fund traders conspiring to steadily knock out offers for the stock and to trigger stop loss orders (This is explained later in this report). This is called walking the stock down. The power of these conspiracies is striking and in many cases allows the shorts can largely determine the price that they want the stock to trade at.

• The stock weakness gives legitimacy to the contrived negative blogs. The idea is to create fear and uncertainty among investors by making all news events appear to be negatives and to fabricate new issues that the shorts hope will demoralize investors.

• The first time I came up against this, my thought was that the blogger was someone who was just more cynical about the chances for success and had an opposite point of view from mine. This is understandable and common in research analysis. I wrote a respectful rebuttal to their argument.

• I thought that after their rebuttal to my rebuttal, this would end the discussion. We had expressed our opposite points of view, would respectively disagree and move on. This had mainly been my experience in my Wall Street days as an analyst when I disagreed with another analyst. I was wrong.

• The situation quickly escalated. In the rebuttal, the blogger accused me of being stupid, deceitful and being paid by the Company to write positive comments.

• In this case, over 20 articles were then written in a period of a year. Usually, they were timed to a press release and regardless of the news and without exception, each was interpreted as a major negative. A major strategy was to argue that management was lying to investors and manipulating the stock.

• The stock would go down on good news, bad news and uncertain news. One of the pillars of stock manipulation is to make good news appear to be bad.

• The blogger was indifferent to truth and actually would make up information that was factually incorrect. When made aware that the information was wrong, he/she would ignore it and even repeat it in later blogs.

• There are a number of bloggers who participate in these attacks. Many of these bloggers appear to work together and coordinate their negative attacks. It is striking that many of these people have connections to one another. Many of them were trained at a well-known blogging site that was founded by hedge fund people.

• Sophisticated use is made of the Internet and social media. Twitter is used to signal that an attack has begun.

• Shorts are well connected to mainstream media and are adept at getting them to unwittingly participate in the scheme.

• Vicious attacks are launched on writers who might have an opposite but hopefully more well-reasoned and balanced view. The usual line is that they are being paid by management to write positive articles.

• Seeking Alpha has become very friendly to articles supporting short selling and is used extensively by the hedge funds. The site actually promotes as one of its favorite authors a person who writes only negative attack article on companies in which he claims that managements are lying and paying authors who have a positive view on the Company. In his disclosure, he states that he shorts stocks, then publishes a negative article on Seeking Alpha and states that he may cover immediately after the article is published. This seems to meet the definition of a pump and dump scheme. He also acknowledges that he is collaborating with other short sellers. I think they contribute the information for most of his articles

• Seeking Alpha allows articles to be published by anonymous authors. These articles are often extremely bearish and are almost certainly written by people at hedge funds.

• Hedge fund create pseudonyms and publish on a daily basis negative comments on message boards like Yahoo and Ihub.

Does this sound familiar to Investors of HMNY? Of course it does! Shorts will bash this article and they will howl that MP never had a chance! The business model was fundamentally flawed. Etc etc. The fact is the shorts have manipulated this stock knowing it would massively harm the proposed business plan. It has worked and the company has been forced to change direction. Something they always had the ability to do anyway. The 8/15 change over to 3 movies a day will start the ticking time bomb yet again. If a moment comes where HMNY does not NEED to dilute the stock to keep up with cash burn, this stock may control its own destiny. And only then can MP and HMNY potentially turn the game around.

But wait there’s more!!! The players in HMNY have done all this before in a well-documented case with a stock called MAXD. Here is a detailed explanation of how it was all done. Don’t want to click – here’s an excerpt:

643,662,180 Knight/Virtu,

154,447,100 Cantor Fitzgerald,

203,762,081 Canaccord Genuity,

769,731,954 Citadel,

<<<<(You should recognize these players!!!)>>>>>>>

247,276,817 Trade/G1

Highlighting these Market Makers abusive activities in-concert with each other for just the one month of May, allows regulators, the SEC, FINRA, the U.S. Attorney as well as the media to easily identify the manipulative trading activity and counterfeiting of MAXD shares engaged in by their traders for the past year and well beyond. When overlaid for the entire year (back to June 1, 2017) the math is shocking. 8,117,878,650 total shares have been shorted representing in excess of 40% of MAXD’s total trading volume and it demonstrates that these market makers have knowingly participated in manipulative trading practices and counterfeiting of MAXD shares.

Again looks familiar…here’s more MAXD is actually trying to fight back.

“MAXD is making this report available to the investment world to create a substantial short squeeze opportunity with the goal to return to its shareholders the massive amount of equity stolen by unscrupulous market makers.”

I encourage all HMNY investors to fight back! Canaccord and Citadel have been colluding to walk HMNY down for almost 100 days now! This is coming from the same company that Ted is using to absolutely flood the market with new ATM shares daily!! This has been an absolute scam on ordinary shareholders. A theft of massive proportions played out by criminal Wall Street bankers who played Farnsworth like a total fool.

Want to fight back call FINRA at 240-386 5105

Or send email to sewall.lee@finra.org who has already begun looking into this case and has an open file. He is aware of Robinhood misrepresentations on Share usage as well.

If you have lost money on this stock and want to see it properly protected from illegal manipulation, do your part! Take some action!