MoviePass becoming its own publicly traded company 'will not be easy,' one expert says

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MoviePass becoming its own publicly traded company 'will not be easy,' one expert says

MoviePass

Hollis Johnson/Business Insider

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  • MoviePass parent company, Helios and Matheson Analytics (HMNY), announced on Tuesday that it plans to split MoviePass into its own separate public company.
  • But Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business, told Business Insider that the move is just another maneuver "to save what might be salvaged," and that it will "not be easy to complete."

On Tuesday, MoviePass' parent company, Helios and Matheson Analytics, announced a puzzling plan to spin off its movie-ticket subscription service into its own separate public company called MoviePass Entertainment.

This is puzzling because Helios and Matheson's entire business effectively consists of MoviePass, and the move comes at a time when the New York attorney general's office is currently investigating whether Helios and Matheson misled investors as to its financial situation (which the company denies doing).

But this latest maneuver from Helios and Matheson might not matter in the long run, according to Erik Gordon, a clinical assistant professor at the University of Michigan's Ross School of Business.

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"It is more financial maneuvering to save what might be salvaged," Gordon told Business Insider. "You can rearrange assets, focus, or diversify, but if you can't find a business model that works, it won't matter."

Finding new money has been one of the main struggles for the company. Helios and Matheson has covered hundreds of millions in losses by selling new shares to the public and diluting previous investors. But that has angered many investors, something which could present problems for Helios and Matheson in the near future.

Shortly before news of the attorney general's investigation broke, Helios and Matheson announced it was postponing a special meeting of stockholders where it will seek approval for a 1-for-500 reverse stock split. That meeting will now take place on November 1. The reverse split is a last-ditch effort to get the Helios and Matheson stock over $1 per share so it's not in danger of being delisted from the Nasdaq in mid-December.

Many investors voiced their objections to the reverse split because agreeing to it could mean their stock might get even more diluted in the future, as Helios and Matheson would potentially be able to issue billions of new shares of stock. (The reverse split itself wouldn't affect an investor's ownership stake in the company.)

That brings us back to the current financial situation and the investigation by the attorney general's office. Would that make it harder for MoviePass Entertainment to get off the blocks as a separate, publicly traded company?

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"Any regulator who looks at it is going to have questions," Gordon said. "It will not be easy to complete."

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