MoviePass is having a rough year.
First, it lost billions of dollars and running out of money. Now, its parent company Helios and Matheson is under investigation.
According to reports from CNBC, New York Attorney General Barbara Underwood is investigating Helios and Matheson. Why, you ask? Trying to misguide investors.
The office is reportedly trying to find out if the company mislead investors regarding its financials. The investigation is still in early stages. It’s happening under the Martin Act, which protects investors and financial markets from fraud.
These are more bad news in the MoviePass camp, after the company’s system crashed in July due to running out of money.
After months of trouble, MoviePass were unable to process their user check-ins due to lack of funds. At the time, the company borrowed $5 million to pay its merchant and fulfillment processors.
Plus, in August, Helios and Matheson reported a loss of $100 million in the second quarter of 2018. The company’s stock also lost most of its value, according to CNBC.
A look into MoviePass
The subscription service launched in 2011 but began gaining steam in 2014. Users pay a monthly fee for a card that allows them to check in and purchase movie tickets. Initially, the plans were offered at $35 for 2D films or $45 for Real3D and IMAX.
The company gained mainstream recognition in August 2017 when they announced a discounted plan for $9.95 per month, allowing for one movie per day each month excluding 3D, IMAX and other special engagements. The subscriber count quickly began rising, hitting 2 million in February 2018, but it soon became apparent they were struggling to keep up with demand.
In April 2018, they removed the unlimited plan, restricting users to one movie per week for the same $9.95 rate. They also rolled out a restriction where once a movie had been watched once, the same user couldn’t check in to watch the movie again. Additionally, the company began requesting that some users send proof of purchase by taking a picture of their ticket stub before they would be allowed to check in and watch another movie.
The company soon reinstated the unlimited pla, but it still reported a $40 million loss in May leading to business moves such as selling merch.