MoviePass’ parent company being investigated over fraud concerns | Industry
Breaking Tech Industry news from the top sources
A person familiar with the investigation confirmed to The Verge that an investigation is underway. The news was first reported by CNBC. The investigation is set to determine “whether the company misled the investment community regarding the company’s financials,” according to CNBC. The attorney general’s office is using New York’s Martin Act, which was designed to protect both investors and financial institutions from fraud, to pursue the investigation.
This investigation is just another issue facing the struggling theater subscription service. A lawsuit against MoviePass by shareholders was launched in August, and The Wrap reported at the time that the shareholders voiced similar concerns, alleging they were deceived by Helios and Matheson to “cause the plaintiff and other members of the class to purchase Helios common stock at artificially inflated prices.”
Consumers have also lost faith in the company and its rocky business. Constant changes, like subscription pricing, removing participating theaters from its program, limiting the number of movies people can see each month, and restricting the type of films they’re MoviePass membership will allow them to watch are all issues brought up by customers in recent months.
The company’s second quarter earnings report this year suggested major financial issues at the company. Operating losses have skyrocketed from less than $3 million in the company’s third quarter last year to $126.6 million this past quarter. Other dismal results, including figures that proved the company burned through $219 million in the second quarter of 2018, with only $51.4 million in assets left, were also jarring.
The Verge has reached out to Helios and Matheson for a statement regarding the attorney general’s inquiry.