MoviePass is reportedly set to be spun off as its own company, separating it from its parent firm Helios and Matheson.

Under the proposal, the long-troubled movie subscription firm would become a new subsidiary called MoviePass Entertainment Holdings and would take over shares of MoviePass Inc. and other film assets held by Helios, pursuing a Nasdaq listing.

The spin has been given preliminary approval by the board of directors and would create a vertically integrated company focused on film production, marketing and exhibition.

However, the move requires the approval of the SEC, the state of Delaware (where the company is incorporated) and the Nasdaq.

The announcement is raising eyebrows among some investors and company observers, as the move comes just days after it was unveiled that the New York State Attorney General’s office is investigating the company.

The probe cites the Martin Act, a New York anti-fraud law often used to contest issues related to securities trading. The attorney general is searching for any evidence that indicates that MoviePass misled its investors, the source said. The case is still in its early stages and no charges have been filed.

Ted Farnsworth, chairman and chief executive of Helios and Matheson, said, according to Deadline, that the spin would distinguish between the company’s movie assets and data properties.

He said: “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.

“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.”

Image: MoviePass