HMNY Shares Implode On News of Secondary Offering; Stock Is Dead Money
There are far too many questions surrounding this secondary, beginning with why was it priced so low? The whole point of running your stock price higher is to raise money at inflated valuations, not at prices 40% below current market price.
What we do know with certainty, however, is that the nature of the Moviepass business requires a large cash buffer to stomach their burn rate. The larger their subscriber base grows, the more money they lose, being that their business model essentially entails paying customers to become customers. The game changing variable lies in whether or not they can turn data generated from subscribers into something of value, or use their large subscriber base as leverage in negotiating preferable deals – neither of which look like they can be accomplished imminently. You either believe in the story, or you don’t. There is no other stock that screams ‘zero-sum’ more loudly than HMNY.
Trading at $6.xx, it looks like a tempting gamble, but as of today I have deleted it from my watch list and will no longer be following it. The drop today completely killed the energy from the bulls and it will take at minimum months to recover, or at least until their monetization story improves. Never buy momentum stocks on the way down. You buy them high to sell them higher.