The Rise and Fall of Helios and Matheson

Over late July and early August of 2018, the financial news cycle was dominated by stories about an obscure information technology services company called Helios and Matheson Analytics Inc. (HMNY). Founded in 2009, this company "helps global enterprises make informed decisions by providing insights into social phenomena," according to the company website.

With projects centered around industries as disparate as retail, education, healthcare, and government, Helios offers a broad range of services. Indeed, the company focuses on everything from IT infrastructure to social data aggregation, from application development to cognitive computing. Below, we'll take a look at some of Helios' major projects, and what brought it into the international spotlight in the summer of 2018.

Diverse Clientele

According to the Helios website, the company has provided services to clients ranging from banking institutions (Goldman Sachs, Standard Chartered) to healthcare providers and services (Delta Dental), and from pharmaceuticals firms (Pfizer) to insurance companies (Metlife).

Two of the company's largest projects are RedZone and MoviePass. RedZone Maps, a "GPS-driven, real-time crime, and navigation map application," capitalizes on Helios' artificial intelligence and facial recognition technologies to expand crime mapping capabilities. The app is designed to help users avoid areas of high crime.

The project which has earned Helios the dubious distinction of being a news darling, however, is MoviePass. In 2017, Helios announced that it had acquired a majority stake in MoviePass, a movie subscription technology company. Developed by a co-founder of Netflix and former president of movie service Redbox, MoviePass was designed to provide movie enthusiasts with low-cost, unlimited subscriptions to attend movie showings in theaters.

Troubled Past

Before taking on MoviePass and other projects, Helios had a troubled past. Helios and Matheson Analytics was born out of an acquisition by an Indian company called Helios and Matheson Information Technology (HMIT). According to a report by Business Insider, HMIT stands accused of having defrauded more than 5,000 creditors. HMIT is now defunct, having created HMNY more than a decade ago. The CEO of Helios, Ted Farnsworth, has downplayed the connection, claiming that he didn't "even know all the players of [HMIT]. Never met them."

However, documents filed with the SEC suggest that there may be closer connections than it appears; HMIT's CEO GK Muralikrishna sits on Helios' board of directors and is paid more than $200,000 per year in consulting fees. A second former high-level executive at HMIT also maintains a management position in HMNY as well.

India's HMIT began in 1991 and went public in 1999. At that time, it bought up a series of five companies in the U.S. and India. In 2006, the company acquired "The A Consulting Team," a U.S.-based company. This would eventually become Helios and Matheson Analytics.

HMIT reportedly paid back its creditors until mid-2014, at which point it stopped this process. HMIT explained that a law change prevented it from acquiring money from new depositors in order to pay back previous creditors, which inspired speculation that the company operated as a type of Ponzi scheme.

Helios and MoviePass

Whatever the status of the murky relationship between HMIT and the U.S.-based Helios, there are nonetheless reasons for the latter to be concerned independent of its origins. In late July, the company experienced a service outage because it was unable to pay for movie tickets requested by subscribers to its service.

In order to make the payments, the company was required to borrow $5 million in cash later in the week. The news followed a reverse stock split which boosted the price of shares from 8 cents to $21, seen by some as an attempt to prevent the company from being removed from the exchange listings. After that, the price of the stock declined tremendously, almost collapsing entirely.

Helios has long received pointed questions about the viability of the MoviePass model. However, with three million or so subscribers, the company has predicted that it would become profitable at five million. Analysts have questioned this, suggesting for months that the company would likely run out of cash to pay for movie tickets before that time, according to Seeking Alpha. In spite of a recent boost to the cost of a MoviePass subscription (from $9.95 per month to $14.95 per month), the company has had a difficult time sustaining itself.

For some, the collapse of MoviePass (and Helios along with it) has been a tragic tale, as the service was originally seen as having the potential to revolutionize a stale industry. However, while Helios continues to struggle along for the time being, it appears that it simply did not approach its goals in a sustainable way.