MoviePass' parent company has flooded its investors with a 3,000% increase in new shares — this chart shows how devastating it's been to the stock price (HMNY)

MoviePass CEO Mitch Lowe and Helios and Matheson Chief Executive Ted Farnsworth.

The share price of Helios & Matheson, the parent company of MoviePass, has plunged in recent months amid ongoing losses at the subscription movie service.
But something else is weighing down the stock price — the more than 3,000% increase just since August in the number of the company's shares.
That dilution is set to only get worse, as the company is seeking authorization to issue even more shares.

The stock price of MoviePass' parent company has plunged amid mounting losses and dwindling cash reserves.

But you can also blame the fall of Helios & Matheson's shares into penny stock territory on simple supply and demand.

To fund the ongoing losses from its movie subscription service and to keep itself in business, Helios & Matheson has issued more and more shares of stock, selling them to institutional investors and, increasingly, to the public.

The numbers are startling. Since August 15, when the company announced its agreement to take a majority stake in MoviePass, Helios & Matheson's share count has increased a staggering 3,429%, from about 7 million shares to nearly 250 million at the end of last month.

Perhaps more incredibly, the company issued most of those shares just in the last two months as it furiously tried to stay ahead of its losses. As of May 11, Helios & Matheson had just 83 million outstanding shares; that number has more than tripled since then.

helios matheson stock price and share count

With so much of Helios & Matheson's stock flooding the market, its share price has cratered in recent months — just as someone who has studied supply-and-demand curves might expect. It's not a perfectly inverse relationship, but in general, as the number of shares in circulation has risen, Helios & Matheson's stock has fallen.

Other things are obviously weighing on the company's shares, most notably MoviePass' money-losing business. The service allows customers to see a movie in theaters every day for just $10 a month, which in many places is less than the cost of a single ticket. Earlier this year, Helios & Matheson was losing more than $20 million a month thanks to MoviePass; now it's losing more than $40 million monthly.

Expect more dilution — a lot more — to come

The fact that the company's shares have plunged as it has massively increased its share count is something investors should keep in mind as Helios & Matheson prepares to issue even more stock. It announced earlier this week that it plans to sell as much as $1.2 billion worth of additional shares to fund its operations.

At the same time, it's seeking shareholder approval to issue scads more shares. Last month, the company announced it wanted to increase its share count from 500,000 to 2 billion. But on Thursday, it raised that target, telling stockholders it wants permission to issue as many as 5 billion shares.

The company hopes to boost its share price with a reverse stock split, exchanging current shares for new ones on anywhere from a 2-to-1 to a 250-to-1 basis. But that's not likely to shore up its share price for the long term.

The reverse split wouldn't affect the total number of shares Helios & Matheson can issue, so if shareholders approve both the split and the increased share count, the total effect will just be to give it room to sell off even more stock. And by alerting investors that it wants to raise more than a billion dollars by selling shares, the company has already indicated what it plans to do with that latitude.

So be prepared for a lot more dilution to come — and for the company's stock to slide even more.

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