I really liked yesterday's news. In an earlier post I was trying to figure out HMNY's cash flow based upon the number of cancellations that would occur each month from the 15% or so heavy users which are costing HMNY dearly.
But now it appears they are simply forcing their hand, mandating a cancellation of the early agreement, which should mean a massive improvement to their cash flow after they refund what's necessary for any prepaid long-term subscriptions.
I was estimating there were 450,000 heavy users (15% of 3 million subscribers). If they were seeing 10 movies per month on average, at a ticket cost to HMNY of $10 per ticket, that's up to $45 million in monthly costs that HMNY suddenly won't have to deal with, starting next month. That's genuinely huge! At least that's the way I read it.
But it still comes down to how many new subscribers they continue to sign at the new pricing model of 3 movies per month for $9.95. Since MoviePass supposedly has 4 times as many theaters available for viewing, compared to their largest rival, my guess is that new subscriptions will continue to grow, especially since the customer is saving money when going to the movies.
At some point in the future, as MoviePass gets enough subscribers, they should be in a position to negotiate discounted ticket prices from the large theater chains, as those chains run the risk of their theaters not participating. As such, those theaters will be fighting hard to keep MoviePass from succeeding, with perhaps some of them even expressing their negative views on this board, as my guess. Can't blame them; business is war.
If MoviePass continues to grow their subscriber base fast enough, they stand to get discounted tickets, revenue sharing with the movies theaters, and targeted advertising revenue. That means they still have a chance to become a mega business someday.
As far as dilution is concerned, I still think it continues, to a lesser extent, but even if they max out at 4 or 5 billion outstanding shares, my guess is that the stock price could make a move to 10 cents or so anyway if we see massive cash flow improvement numbers because of yesterday's news, and then only a 10 or 20x reverse split could bring the stock back to the Nasdaq level, while bringing the outstanding shares back to a more reasonable hundreds of millions of shares for long term price appreciation.
I'm in with a few shares at just over 2 cents this time. I have no idea if the bottom is in or not but I'll just have to wait to see subscribers and cash flow numbers in the future. So for now, it's still just a big option gamble on my part; could slay it; could lose it all.
Just my opinion; not investment advice; please do your own due diligence.
AI
