Why Helios and Matheson Stock Tumbled 27% Today
Helios and Matheson Analytics (NASDAQ: HMNY) stock dropped again on Monday — this time down 27.6% as of 1:30 PM EDT — on news that the majority owner of movie subscription service MoviePass is planning another reverse stock split.
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And this time, it's probably going to be 500 for 1.
Don't say you weren't warned. Two weeks ago, I predicted that with Helios shares selling (far) below the $1-a-share price necessary for continued listing privileges on the Nasdaq, management would soon have to take drastic action to raise its share price.
Today, Helios filed a preliminary proxy statement (a "PRE 14A") with the SEC advising that on Oct. 18, it will ask shareholders to vote to approve "a one-time reverse stock split … in a ratio of 1 share-for-2 shares up to a ratio of 1 share-for-500 shares."
With Helios shares currently valued at about one and a half cents each, of course, a "1 share-for-2 shares" reverse split would do exactly nothing to help keep this stock trading on the Nasdaq. Fact is, the very least investors should expect is a 1-for-67 split, which would get the shares barely over the $1 threshold.
And if I were betting money (note: I am most definitely not betting any money on Helios and Matheson stock — ever), I'd say the odds heavily favor management going all in and reverse-splitting this stock 500 for 1. That would at least temporarily lift the stock price to $7.50 a share or so, although there's no telling how long it would remain there.
One thing's for sure: Investors who own stock in this company should keep their calculators handy and prepare to divide however many shares they own now by 500.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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