MoviePass' parent wants to spin it off into a separate company, as the government investigates its finances
On Tuesday, MoviePass parent company Helios and Matheson Analytics (HMNY) announced a "preliminary plan" to spin off MoviePass into a separate public company.
The announcement comes just days after the New York Attorney General's office announced that it was investigating Helios and Matheson to determine whether the company misled investors, a claim which the company denied.
"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. "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 long and 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 "a GPS-driven, real-time crime and navigation map application." However the app has not been updated since April and does not appear to function as intended.
At present, MoviePass effectively comprises the entirety 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 in losses by selling new shares of stock to the public.
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 endeavoring 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 theater 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."
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