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As MoviePass subscribers appear to continue to lose faith in the theater subscription service, parent Helios and Matheson is hoping for more love from Wall Street by unveiling “preliminary” plans for an initial public offering.
HMNY said Tuesday that its board of directors approved a plan to create a vertically integrated film production, marketing and exhibition company. Under the plan, a separate entity, MoviePass Entertainment Holdings, would be spun off to serve as a publicly traded holding company to, in part, comprise stock of MoviePass currently held by HMNY and accounting for 92 percent of the outstanding shares.
The company said it aimed to get the separate entity on the NASDAQ Exchange, or “an alternate trading market.”
The holding company will include the membership interests of MoviePass Films LLC, HMNY’s movie production company, in partnership with Emmett Furla Oasis Films, and other assets.
“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,” HMNY chairman and CEO Ted Farnsworth said in a statement.
Since Farnsworth’s company first invested in MoviePass last year, wild fluctuations in its share price have been commonplace and, more recently, shares have been left at penny stock levels. The decimated stock has likely ended earlier hopes to raise $1.2 billion to grow MoviePass through acquisitions, as outlined in SEC filings.
HMNY has traditionally provided customer data to companies including BMW and TD Waterhouse, and has been trading publicly on the Nasdaq exchange since 1997. But while MoviePass is touted as a consumer data play, critics remain unimpressed by its business model as the monthly subscription service bleeds money and whipsaws subscribers.
In late July, MoviePass raised its monthly price to $14.95 and began limiting first-run movies. Days later, the rules changed again.
MoviePass announced it was keeping its monthly fee at $9.95, but reduced the number of titles a patron can see to three per month. That also applies to those who have paid for an annual subscription.
The preliminary IPO plans unveiled Tuesday would see a minority of MoviePass’ outstanding stock distributed as a dividend to HMNY shareholders. And the parent company would keep control of MoviePass Entertainment after that distribution.
Those holding outstanding convertible notes issued by HMNY in November 2017 and January of this year and certain warrants of HMNY will be entitled to participate in the distribution of MoviePass Entertainment shares.
“We believe this new vertically integrated entertainment ecosystem, if achieved, would provide a sharper market focus, and that the combination of these four business lines under the MoviePass Entertainment umbrella would produce substantial synergies that we believe will generate value for our shareholders, subscribers and business partners,” Farnsworth said.
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