- MoviePass’ parent company, Helios and Matheson Analytics, wants to spin off MoviePass into a separate publicly traded company.
- Helios and Matheson has been under fire for months from angry investors, and the New York attorney general’s office recently confirmed it was investigating whether the company had misled investors (a claim the company denies).
- Helios and Matheson has a complicated history as a Nasdaq-listed company, and it was once controlled by an Indian company accused of massive fraud.
On Tuesday, MoviePass’ parent company, Helios and Matheson Analytics, announced a “preliminary plan” to spin off MoviePass and its related entertainment assets into a separate public company.
The announcement came just days after the New York attorney general’s office said it was investigating Helios and Matheson to determine whether the company misled investors, a claim the company denied. It also came days before a crucial shareholders meeting set to take place November 1, when Helios and Matheson is expected to seek authorization for a 1-for-500 reverse stock split – a move some investors are against. The reverse split is an attempt to raise Helios and Matheson’s stock price to avoid delisting from the Nasdaq, which could happen as soon as mid-December.
“For many years, HMNY has been focused on data analytics, and in that capacity we own assets like Zone Technologies which provides a safety and navigation app for iOS and Android users and a global security concierge service,” Helios and Matheson CEO Ted Farnsworth said in a statement on the spin-off, using an abbreviation for Helios and Matheson. “Since we acquired control of MoviePass in December 2017, HMNY largely has become synonymous with MoviePass in the public’s eye, leading us to believe that our shareholders and the market perception of HMNY might benefit from separating our movie-related assets from the rest of our company.”
Helios and Matheson has a complicated history as a Nasdaq-listed company. Before the Farnsworth-MoviePass era, the New York outpost of Helios and Matheson was controlled by an Indian company (Helios and Matheson Information Technology), which stands accused of defrauding at least 5,000 creditors in India, including banks and senior citizens. The company was involved in many facets of information-technology consulting.
HMIT in India began to extricate itself from the US business in 2016 when HMNY merged with Farnsworth’s money-losing startup, Zone Technologies. Zone Technologies created a “GPS-driven, real-time crime and navigation map application.” The RedZone Map app has not been updated since April, however, and does not appear to function as intended.
At present, MoviePass effectively accounts for all of Helios and Matheson’s business.
But the Nasdaq listing of Helios and Matheson has been crucial to MoviePass, as it has allowed the movie-ticket subscription app to fund hundreds of millions of dollars in losses by selling new shares of Helios and Matheson stock to the public. This has rankled many shareholders who have seen their stakes diluted and the stock price crater – Helios and Matheson is now trading at about $US0.02. Some retail investors have seen their stakes drop over 99% in value and told Business Insider they had lost more than $US100,000 on the stock.
Now Helios and Matheson seeks to spin off MoviePass into another publicly listed company.
Here’s the plan, according to Helios and Matheson:
“HMNY is endeavouring to create MoviePass Entertainment Holdings as a separate publicly traded holding company that would contain the following four assets: (i) the shares of common stock of MoviePass Inc. (‘MoviePass’), the nation’s leading movie theatre subscription service, held by HMNY, which currently comprise approximately 92% of the outstanding shares (excluding options and warrants) of MoviePass, (ii) the membership interests of MoviePass Films LLC (‘MoviePass Films’), HMNY’s movie production company partnered with Emmett Furla Oasis Films, held by HMNY, equal to 51% of the outstanding membership interests of MoviePass Films, (iii) the membership interests of MoviePass Ventures LLC (‘MoviePass Ventures’), an acquirer and owner of economic interests in completed films, held by HMNY, equal to 100% of the outstanding membership interests of MoviePass Ventures, and (iv) Moviefone™, a multimedia media information and advertising service.
“If permitted to do so under applicable Delaware law, HMNY plans to distribute a minority of the outstanding shares of MoviePass Entertainment common stock as a dividend to stockholders of HMNY as of a record date that is yet to be determined, with HMNY retaining control of MoviePass Entertainment upon any such distribution. Holders of any outstanding convertible notes issued by HMNY in November 2017 and January 2018 and certain warrants of HMNY, as of the applicable record date, would be entitled to participate in any distribution of MoviePass Entertainment shares to the extent required by the terms of such notes and warrants. As previously reported in a Current Report on Form 8-K filed by HMNY on October 4, 2018, all the convertible notes issued by HMNY in June 2018 have been cancelled.
“Regardless of whether HMNY can effect a dividend of a portion of the MoviePass Entertainment shares held by it under Delaware law, HMNY plans to seek to cause MoviePass Entertainment to become a separate public company listed on Nasdaq or an alternate trading market, if MoviePass Entertainment can satisfy the applicable initial listing criteria of the applicable exchange or trading market.”
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