Small Cap Stocks that Used to Be Large Cap: Helios and Matheson Downfall

Small Cap Stocks

To be frank, Helios and Matheson stock has as good as flatlined. It’s quite an unprecedented stock fall from grace, and in a relatively short amount of time. Once a massive stock, HMNY is now very much a small cap stock among small cap stocks. It’s currently selling for $0.02 USD.

Small Cap Stocks: Helios and Matheson (NASDAQ:HMNY)

Helios and Matheson stock was selling for approximately $2,500 per share only nine months ago. That is hard to get your head around.

How can a data analytics company that was so big then be worth so little now?

Of course, the reason for the decline was the company’s investment into MoviePass. An ambitious movie-going business model that attempted to give subscribers unlimited movie theatre access for as little as $9.99 per month. It was considered “the next big thing” in entertainment. 

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A Doomed Business Model Creates a Small Cap Stock

But it was a business model that was doomed to fail; one standard movie ticket would cost the company approximately the same price as a monthly subscription—$9.99. If a subscriber took advantage of their unlimited pass and went to the cinema more than once, the company lost money.

Quite simply, it was impossible for MoviePass to make a profit from the subscription service itself; the more subscribers go to the movies, the more money the company has to pay out for cinema tickets.

Things really began to look bad for Helios and Matheson back in April when the company disclosed in a filing with the SEC that there was “substantial doubt” expressed by an auditor on its ability to continue.

It was showing an average cash deficit of $21.7 million a month from September 2017 to April 2018. Investors began selling, and selling fast.

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Flogging a Dead Horse

The company continually tried to fix the problem by altering the cost of its subscription service and perks. It would increase costs whilst simultaneously reducing the perks and this only made things worse. Infuriated customers equaled infuriated investors. 

The data analytics company continues to see its small cap stocks languish from its announcements of further weak offerings.

It has been looking for other partnerships to try and help its case. It has spoken about Uber and Amazon but whether this is just hearsay remains to be seen. If something can rescue this company, then perhaps the small cap stock could become large once more. 

But for now, that stock line is looking very flat at the 2 cent price point.

Featured Image: Depositphotos/© fuzzbones