MoviePass’ embattled parent company, Helios & Matheson Analytics Inc., on Wednesday denied that it has misled investors, in response to a new investigation by the New York attorney general’s office.
New York Atty. Gen. Barbara Underwood has opened a probe into the owner of the money-losing cinema subscription service to see whether it misrepresented its finances to shareholders, the company acknowledged.
The investigation is the latest blow for MoviePass, which has adjusted its offering multiple times to slow the hemorrhaging of cash. The New York-based start-up attracted more than 3 million subscribers by allowing customers to see a movie-a-day in theaters for $9.95 a month.
But after facing a cash crunch and a plummeting stock price, the company in August restricted subscribers to three films a month. The drastic measure led many analysts and Hollywood executives to believe the once-popular service was on its last legs. On social media, multiple users have said they quit the service in favor of competitors.
Underwood’s office did not have an immediate comment on the investigation, which was first reported by CNBC. Helios & Matheson, a publicly traded data company headquartered in New York, said it is cooperating with the probe.
“We are aware of the New York attorney general’s inquiry and are fully cooperating with it,” the company said in an emailed statement. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors. We look forward to the opportunity to demonstrate that to the New York attorney general.”
It is not the first time MoviePass has been accused of misleading Wall Street.
MoviePass and its parent company, respectively led by the outspoken Mitch Lowe and Ted Farnsworth, have long insisted they have a plan to become profitable, despite a business model that requires MoviePass to pay theaters owners the full price of tickets for each movie that subscribers see.
But the company has been hit with class-action lawsuits from investors who say the company was not transparent about its financial prospects. Also in August, Helios & Matheson board member Carl J. Schramm resigned and accused the firm of withholding information.
Helios & Matheson in August reported an operating loss of $126.6 million for the second quarter, largely thanks to MoviePass’ struggles. In the last year, its stock has lost nearly all of its value, currently trading at 2 cents a share.
MoviePass, which first launched in 2011, angered theater owners last year when it dropped its monthly fee to $9.95 from about $30. AMC Theatres, which has been vocal in its opposition to MoviePass, recently launched its own subscription service, allowing subscribers to see as many as three movies a week for $19.95 a month. That program has attracted about 400,000 users, according to Leawood, Kan.-based AMC.