Helios & Matheson Analytics Inc. on Thursday said it has filed confidentially with the Securities and Exchange Commission to spin off its cinema discount-ticketing service MoviePass.
The news was expected. The company said it would spin off the service back in October, when its board approved a plan to create a subsidiary called MoviePass Entertainment Holdings Inc. The subsidiary would hold the company’s subscription-service and film-production arm and be spun off as a separate publicly traded company.
On Thursday, the company said it would apply to list on Nasdaq or an alternative exchange, and distribute some of MoviePass shares as a dividend to shareholders as of a record date yet to be determined. Helios & Matheson HMNY, +2.88% will retain a controlling stake in MoviePass, which offers consumers various packages that allow them to see films at discounted prices.
Helios & Matheson has struggled to make MoviePass viable.
It was a rather sleepy data analytics company when it first acquired a majority stake in the service in August of 2017. The company immediately slashed the monthly fee to $9.95 a month from up to $50 a month, allowing subscribers to see a film of their choice every day. Its subscriber base ballooned to cross the three-million mark last June. But the cost of covering full price for each ticket a subscriber ordered overwhelmed it and it ended up burning through its cash holdings and generating a string of monthly cash deficits.
See also: Sinemia to launch service to help theaters set up their own movie subscription programs
Ambitious plans to monetize customer data by using it to sell ads and drive box-office revenue that might lead to a partnership with a studio or cinema chain didn’t come to fruition. In April, its auditor expressed “substantial doubt” about its ability to continue as a going concern.
For more, read: The spectacular rise and fall of MoviePass
Through the summer, the company irked its own customers by repeatedly changing the terms of its offering, limiting access to bigger films and restricting viewings to certain times of day. In July, a “service interruption” occurred when it failed to pay vendors. With its stock crashing, the company sold preferred stock and convertible notes and filed a shelf registration to raise $1.2 billion over three years by issuing equity and debt. It implemented a 1-to-250 reverse stock split, but that failed to boost its flailing share price. On Friday, the stock was vacillating between 1 cent and 2 cents.
New York Attorney General Barbara Underwood has launched a securities fraud investigation into the company.
Meanwhile, its main competitor, AMC Theaters’ Stubs A-List program, which allows customers to see three movies a week in any format for a $19.95 monthly fee, said in late December that it now has more than 600,000 members. That service was launched in June of last year, and has exceeded the company’s own internal goal of attracting 500,000 customers within a year of launch.
Read now: AMC’s subscription program now offers a better deal than MoviePass
Related: A student loan company offers new borrowers a free year of MoviePass
AMC shares AMC, +1.77% were up 2% Friday, and have gained 4.5% in the last 12 months, while the S&P 500 SPX, +0.21% and Dow Jones Industrial Average DJIA, -0.06% have fallen about 7%.
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