October 18, 2018
The New York Attorney General’s office reportedly has opened an investigation into fiscally-challenged Helios and Matheson Analytics, corporate parent of theatrical ticket subscription service MoviePass.
CNBC, citing a source familiar with the investigation, reported NY AG Barbara Underwood is investigating whether HMNY mislead investors about its fiscal health – a situation underscored by the company’s stock currently trading at 2 cents per share, despite a recent 1-for-250 shares reverse stock split.
“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement to CNBC. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors. We look forward to the opportunity to demonstrate that to the New York Attorney General.”
Notably, HMNY has yet to mention the investigation on its website despite the fact it is seeking shareholder support for another reverse stock split, this one combining 500 shares into one.
A stock split is typically used by publicly traded companies seeking to lure investors (by reducing the cost of shares) or artificially buttressing a stock’s valuation – the latter employed by HMNY to push shares above Nasdaq’s minimum $1 valuation and avoid being delisted.
HMNY’s fiscal woes have been driven by MoviePass offering subscribers daily access to a theatrical screening for $9.95 monthly fee – a disrupting business model that is financially unsustainable. MoviePass now limits subscribers to three screenings monthly.
Regardless, HMNY has continually told investors its finances are sound and that steps have been taken to reduce costs. The company’s most-recent regulatory filing tells a different story.
HMNY reported a $109 million net loss in the fiscal period ended June 30, with just $15 million in cash available.