MoviePass’ owner said Tuesday it plans to spin off the flailing subscription service into a separate, publicly traded company.
Helios and Matheson — which has seen its stock plunge to practically nil since it took control of the money-losing app last August — said it’s spinning off MoviePass to improve the “market perception” of its own company, which trades under the ticker symbol HMNY.
“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 CEO Ted Farnsworth said.
Helios shares have been trading below 3 cents for the past several weeks, as the $9.95-a-month service to see unlimited movies in theaters spurred a $127 million quarterly loss in August.
While the too-good-to-be-true deal lured 3 million subscribers in under a year, it also spurred an unstoppable cash burn. Over the past few months, MoviePass has gone off-line several times because of Helios’ cash crunch, which forced the company to take out a $5 million emergency loan to continue a modified film offering to subscribers.
It recently changed MoviePass to a three-movie-per-month service, compared with its original movie-a-day offering.
On Tuesday’s news, Helios shares jumped as much as 40 percent — to 2.5 cents, from 1.7 cents.
Helios said its board has approved a preliminary plan to create a stand-alone company called MoviePass Entertainment Holdings that will take all entertainment and film-related assets off of Helios’ hands.
Helios plans to distribute Movie Pass Entertainment common shares to Helios and Matheson stockholders.
The news comes a week after New York Attorney General Barbara Underwood’s office opened a probe into whether Helios misled investors about its finances.
The investigation was filed under the Martin Act, a New York statute designed to combat fraud and protect investors.
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