Why Helios and Matheson Stock Popped 35% Today

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What happened

After falling steadily for most of the week -- a fall finally broken by yesterday's $0.02 hopscotch higher -- shares of MoviePass owner Helios and Matheson Analytics (NASDAQ: HMNY) surged definitively higher on Friday, closing up 34.7% and completing a round trip back to the price it fetched precisely one week ago.

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So what

Why the sudden turnaround? Short covering is certainly one possible explanation. Another is that investors are responding positively to an 8-K filing that the MoviePass owner made with the SEC this morning.

As detailed in that filing, Helios has agreed with owners of certain warrants (to buy stock) that it had previously issued to exchange those warrants for actual shares of Helios stock at a 1-to-0.85 ratio, converting 26.6 million warrants into 22.6 million shares -- and sparing Helios' other shareholders 4 million shares worth of stock dilution in the process.

As part of the agreement, the acquirers of the new shares have also agreed not to sell any of them before either July 23, 2018, or the date Helios shareholders approve a reverse stock split of their stock -- whichever date comes first.

Now what

My guess is it's a combination of these two factors that gave Helios stock a helping hand today. On the one hand, certain investors are showing confidence in Helios' viability by converting their warrants into equity. At the same time, they're promising not to sell their new shares for about a month, which may relieve some downward pressure on the share price.

Still, I have to say I'm a bit surprised at the amount of upward pressure we're seeing today. After all, if these are the warrants I'm thinking of, they were originally only valuable in the event Helios climbed above $5.50 (or even $6.50) a share -- a goal that now seems a long way off. Seems to me, the folks who converted warrants today got a steal of a deal even at a 15% haircut.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.