Helios & Matheson needs to trade at $1 per share by the 18th of December. If not, it will be delisted from the stock market.
By authorizing a 1-share for 500 split, the company intends to inflate its stock price. The price of Helios & Matheson is currently trading at 2 cents per share, which has to be raised to $1 per share to remain listed in Nasdaq.
In July, the company had made a reverse split of 1-for-250 and the share prices reached a record of $21.25 on adjusted value. But with various issues which created a storm in the market, the shares faced a cash crunch.
The vote which will take place on October 18, will decide on the stock proposal to take place.
The company has to continue being listed in Nasdaq to ensure a steady capital and support to weakening value. Helios and Matheson Analytics (HMNY) is the parent company of MoviePass.
HMNY has said in a filing that MoviePass had taken cost-cutting measures to reduce its cash deficit every month. By raising capital, MoviePass can get the required capital support until it is able to generate profits.
MoviePass was acquired by HMNY in August 2017, but the company has lost much in trying to make the movie-theater business profitable. Apart from poor revenue, it also faces massive loss and intense competition from others like Alamo Drafthouse, Cinemark and AMC.
Reverse share split is usually undertaken when shares of a company fall down to low levels per share. It helps in market capitalization stability which in turn increases the value of shares.
HMNY already faces other critical deficiencies to remain listed on Nasdaq. It is not able to maintain its minimum market value of $35 million. It also does not have 3 independent directors on its audit committee.
The company fears that investors may not be attracted to low-priced stocks for trading.