Short sellers have ripped into Helios and Matheson Analytics Inc. (NASDAQ: HNMY), parent of falling MoviePass, a subscription service for moviegoers. For the period that ended September 28, shares sold short in the company rose 47% to 67 million, which is over 10% of the float.
The short position is an easy gamble, based on the trouble MoviePass has faced and still faces. Helios and Matheson keeps running low on money. Its stock trades below two cents. It is a walking, barely, candidate for bankruptcy. The company said it recently raised $65 million. That has led to betting on how quickly the money will be gone, not whether Helios and Matheson can use it to fix MoviePass. It is not a fraction of enough capital.
Too few investors believe that consumers want MoviePass at all. Theater chains have created their own competition. Moviegoers may just want to buy their tickets movie by movie. Troubles at MoviePass have frightened some people away. And people increasingly watch their movies via services from Netflix and Amazon Prime, each of which has tens of millions of members.
Helios and Matheson also faces a slew of class action suits that claim it misled investors about the prospects for MoviePass’s growth. Whether those who have sued the company prevail, the litigation will be expensive and cost management time, neither of which it can afford.
Helios and Matheson is walking dead. The issue for short sellers is just at what price they went short. The stock will never recover.