Helios and Matheson of New York, the company that runs the popular MoviePass discount service for movie theater tickets are currently being investigated. First reported by CNBC, the New York Attorney General is heading the investigations based on allegations that Helios and Matheson misled its investors.
Helios and Matheson, MoviePass’ parent company, issued a prepared release that stated that they are fully aware of the New York Attorney General’s investigation. The company also said that they believe their public disclosures are, and always have been, complete, timely, and truthful. They maintain that they have not misled any of their investors.
It is known that Helios and Matheson have struggled on the financial front, and they are now facing class-action lawsuits. The lawsuits are getting filed on behalf of MoviePass investors that are claiming Helios and Matheson failed to divulge vital aspects of a business model that wasn’t sustainable.
MoviePass itself brought in millions of subscribers with a low monthly rate of ten dollars. However, it proved expensive. While MoviePass charged a monthly rate, they still pay movie theaters the full price of the ticket, which is upwards of $15 in large cities. It’s possible for a single movie to put the service in the red. Helios and Matheson had to get an emergency loan of five million dollars just to pay the payment processors after multiple missed payments resulted in service interruptions.
During the summer, MoviePass introduced a 50 percent price hike to their monthly subscription fee and received subscriber backlash. MoviePass also initiated a cap of three movies each month, instead of the initial one per day.
Shares of Helios and Matheson plunged to approximately a penny, and the company is now in danger of being delisted by Nasdaq. At this time, there is no information on which investors are involved in filing the class action lawsuits, and whether or not MoviePass is going to remain as one of Helios and Matheson’s subsidiary companies.