Valentine’s Update

To save time, I’m going to try a new “diary” format. As I work, I will periodically make a recording of anything interesting I find.

The recordings will all start with a one minute introduction to this new format, followed by two and a half minutes of legal disclosures and disclaimers. Finally, at the 3:24 mark, I will start talking abut things that people might actually care about.

In this episode: It’s not all love on Valentine’s Day. I simply provide my honest opinion on HMNY, AMC, and their current situation. HERE’S THE AUDIOCAST. Enjoy.

Disclosures / Disclaimers: I am long AMC. However, I do not encourage or recommend for anyone to hold this  or any other stock I own, since I may exit the entire position at any time without notice. I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article.

The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.  I am not a financial advisor.  Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein.  Similarly, the disclosure above may state that I am long or short shares of the companies mentioned herein, but should not be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. That disclosure is true as of the time the article is placed in queue for publication, but it is possible (or even likely) that I might be buying and/or selling the stocks mentioned herein immediately thereafter or at any other time, regardless of (and possibly contrary to) the content of this article or this website’s timing of its release.  The disclosure will not be updated following submission of the article and may be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are.  I wrote this article myself and I receive no compensation for writing it.  All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

Long-time readers should note some significant changes in how I communicate in the public domain. The sole purpose of this forum is now to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses. Accordingly, this document should not be construed as an endorsement of the companies or securities discussed herein. The disclosure below is critical to understanding the content of this document. Further, I frequently trade my positions and may buy, sell, or short the securities mentioned herein at any time, regardless of the facts or perceived implications of this article.

 

19 thoughts on “Valentine’s Update

  1. Mark. Do you remember the original 100m convertible debt deal? Well, they only took 20m of that and apparently Ted feels the raise today (and the last one) was better terms and therefore paid back the 20m and is no longer going to fund with that deal. I am still trying to find proof of this, but if true, do you agree with that? When I look at it, I see the original 100m deal as better than these stock + warrant deals.

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      1. That’s a good point. On top of that, this deals does not smell like a deal that would be necessary if they were almost cash flow positive as they have stated.

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      2. A couple of interesting things I got from the prospectus regarding use of proceeds that might affect your numbers in the podcast a bit. Looks like they are paying back the following with it:
        1. 4.6 million notes from 8/2016.
        2. 30 million of Jan 2018 notes.

        Other relevant info it states:
        1. No unrestricted principal remaining from the 11/2017 convertible notes, so they must have paid this 20 million with the December offering or possibly the January notes.
        2. The proceeds from 8/2017, 11/2017 and 1/2018 convertible notes were used primarily to increase equity ownership in MoviePass.
        3. Some of the proceeds of this equity offering may be used to increase equity ownership in MoviePass.

        The cash burn may not be as bad as you think if they have retired or will retire 55 million of debt with some of the money from the offerings. I understand some of that 55 million is fees, interest, etc. The pricing on this deal makes me wonder if it is on purpose, meaning Ted is really not concerned with getting the best deal, but rather getting more shares out there so small movements in stock price can get him his market cap bonuses. I almost think this is the case. I hate not to trust him, but I really don’t.

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        1. The raises aren’t factored into my cash burn numbers. They simply help to confirm them, based on the stats Mitch provided in his most recent interview.

          Regardless of the use of funds, the deal was terrible IMHO. Whoever is responsible for the financial planning there should be hung from a tree. LOL.

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  2. From your comment on PUT options for AMC. (remember I am new to options and want to see if I understand here)

    The June PUTS are selling for 1.80 @ 15 strike. This is basically saying if it is 15 or more by June they expire worthless. If it is at 13.20 in June it is break even. Anything above that or below 15 the commission of the sale covers the difference.

    Just wanting confirmation that I am understanding or correction if I am not.

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    1. That is correct, I’ve explained selling PUTS like this: The shares are trading at $16, you want to buy but don’t want to pay more than $15, you can
      1. Place a limit order to buy at $15 and wait to see if it drops to your price OR!
      2. Sell a $15 PUT, collect the premium ($1.80 in your example) and then IF it drops to $15 or below get PUT the shares at what was your limit price, essentially get paid to wait for it to drop to $15, if it doesn’t then yes, you keep $180 per contract when they expire, or have a cost basis of $13.20 as a break-even if assigned. More simply, get paid to wait for a drop that may or may not come

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  3. From someone at the Maxim meeting yesterday… Ted claims they paid off all convertible debt and have about 110 million in cash. Also said they will update soon (maybe next week) what HMNY’s ownership % of MP is. This is second or third hand info so I cannot vouch for accuracy.

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      1. No problem. I also heard he told the investors there would be no more dilutive financing going forward, but I have to say I do not believe that anymore.

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        1. For the near term, I believe it. They have a lot of cash and are pulling in 1 year of cash on many (if not most) subscription sales. I just don’t like how they got to this point. Too much dilution already.

          Did you happen to get a fully diluted share count? I haven’t run that number lately and pity anyone facing the task. 😂

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        1. So it’s 43. With the warrants, they’d receive more cash than the stock is worth now. No impact on EV.

          43M shares x $5 per share, minus the net cash makes for an interesting enterprise value. Warrants and the executive comp plan are a bit of a valuation headwind if they succeed in achieving sustainable profitability, but not insurmountable.

          I’m still not enticed though. The valuation on this round, plus the CAC, customer utilization, and cash burn are all still too prohibitive to becoming positive on this one (for now at least).

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