Shares of MoviePass majority owner Helios and Matheson Analytics (NASDAQ:HMNY) have plunged today, down by 23% as of 11:30 a.m. EDT, after the company said it had closed a previously announced capital raise, while acknowledging that it had received a formal notice of delisting from the Nasdaq. The decline follows yesterday's drop.
The offering, which was announced less than a week ago, includes $164 million in convertible notes as well as 20,500 shares of preferred stock and closed yesterday. Helios and Matheson was able to raise $20.5 million from the offering, with the convertible notes maturing in two years. The company's cash burn has been of particular concern, dragging down the stock all year.
Additionally, the prospect of getting delisted has also been an overhang.
Helios and Matheson also confirmed that it received a deficiency letter from the Nasdaq on June 21, warning that shares could be delisted because the stock price has closed under $1 per share for the last 30 consecutive business days. The company already saw this coming, as shares fell below $1 in May, and it has already proposed a reverse stock split that would artificially increase the share price. The proposed ratio for the reverse split could be anywhere from 1-to-2 to 1-to-250, with the ratio being selected by the board if shareholders approve the proposal.
The letter merely serves as an official notice that gives the company 180 calendar days (until Dec. 18, 2018) to regain compliance with listing requirements, so there is no immediate impact on the stock's listing status. The reverse split would be a superficial solution to a real problem, as the deeper concern is the sustainability of MoviePass' business model, which has changed several times already.