MoviePass' owner is suddenly trading around $14, but one expert warns the service still has a major challenge ahead

• MoviePass owner Helios and Matheson Analytics was trading at around $14 Wednesday morning after a reverse stock split.
• If it trades at $1 or above for 10 straight trading days, with a market cap of $50 million, the stock will no longer be at risk of being delisted from the Nasdaq.
• But according to Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business, HMNY getting the stock above $1 was the easy part, what will be hard is finding new money.

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At the end of trading on Tuesday, MoviePass' owner, Helios and Matheson Analytics (HMNY), did a reverse stock split that rocketed its stock price from 9 cents to around $14 on Wednesday morning.

Because of its low share price, HMNY had been at risk of getting delisted from the Nasdaq by mid-December if the stock continued to trade below $1. That's why HMNY got approval from its shareholders on Monday to do a 1-for-250 reverse stock split to try and stave off that fate.

With the HMNY stock now priced at around $14, as long as it stays at $1 or above for 10 straight trading days, at above a $50 million market cap, the stock will no longer be at risk of being delisted, according to Nasdaq. If it goes right back down below $1, however, it will still be at risk, and it will have become clear that the company's gambit didn't pay off.

"I'm not worried," Helios and Matheson CEO Ted Farnsworth told Business Insider recently when asked about the company's finances. "We're taking a company from literally doing $10 million a year, to the end of this year we'll be on a run rate of probably $500 to $600 million."

However, though the stock price of HMNY is currently above $1, the reality is that it's still a risk in the eyes of most on Wall Street, according to Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business.

Before the reverse split, HMNY stock was down 99% from its October 2017 high of more than $38.

"You do the reverse split and get over a dollar, but I don't think that will attract people," Gordon told Business Insider. "I mean, theoretically there could be somebody stupid enough to go, 'Wow, it went from nine cents to [$14].'"

Gordon said the easy part for HMNY was getting the stock above $1, what will be harder is attracting money.

"Their real challenge is how they are going to attract substantial amounts of cash to finance their business model and stay in business," Gordon said. "And that means new cash."

And it's going to be hard.

Gordon noted that because of its financial troubles, HMNY will not be attractive to smart tech money or suddenly appear on Edward Jones pick list. And at least at the start of trading on Wednesday, it looks like most in the market don't have much confidence in HMNY. Based on Tuesday's prices, one share worth 9 cents would be worth $22.50 after the reverse split, but the stock opened very soft off the bell, and was trading around $14 Wednesday morning.

However, Farnsworth is staying optimistic.

"Wall Street understands how we operate," he said. "They love the story. They think we're the next unicorn company."

Along with the reverse stock split, HMNY shareholders on Monday also approved an increase of the company's common stock from 500 million to 5 billion.

"We could have made a conscious decision to slow down, we talked about it for months, 'If we raise the [subscription] price we'll slow down the growth,' but what Wall Street really wants is to see that growth," Farnsworth said of the growing number of subscribers to MoviePass, which he hopes will hit 5 million by the end of the year. "As long as you show that growth story with Wall Street they will always be behind you."

But Gordon isn't so sure about that.

"At some point, parts of your story have to start looking true," he said. "For some investors, that's the scariest thing you can hear, 'They love the story.'"