Double Blunder

My dumbest investment was investing in Helios and Matheson Analytics, the company behind MoviePass.

Another dumb move was buying Novavax at around $2.30 per share (before a reverse split that boosted its price) and then doubling down after its failed clinical trial. — P.D., online

The Fool Responds: Ouch. MoviePass presented a problematic business model, essentially giving away more than it took in when it offered subscribers the ability to see unlimited movies in theaters for $9.95 per month. The company, meanwhile, was paying retail prices for those seats its subscribers were filling. The nail in the coffin was when movie theater owners such as AMC launched rival, and more profitable, services.

Vaccine developer Novavax is another story, and a volatile one. Your first red flag was its share price: Stocks trading for less than about $5 per share are penny stocks. They may look like bargains, but they’re often on shaky ground, more likely to head south than north. Reverse splits are another red flag, as their primary purpose is to increase a stock’s price (while reducing the number of shares outstanding, proportionately), and they’re typically executed by struggling companies.

In Novavax’s case, its shares had traded below $1 per share for 30 consecutive days, and the Nasdaq Stock Market warned that it would be de-listed if it didn’t get its price back up above $1. The reverse split achieved that. (The stock was recently trading near $6.75.)