Amid ongoing drama over MoviePass’ consistent flailing and cutbacks on its once unlimited monthly movie-going subscription under financial pressure, it appears things just got even more complicated for the beleaguered e-ticketing startup. MoviePass parent company Helios and Matheson Analytics, Inc. is now under investigation for allegedly misleading its investors about its financial health, a claim the company denies.
“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” a spokesperson for Helios and Matheson told Gizmodo in a 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.”
A spokesperson for New York Attorney General Barbara Underwood did not immediately return a request for comment.
The probe was first reported Wednesday by CNBC, which claimed the investigation was in the “early stages” and cited an individual with knowledge of the situation. According to CNBC, “The attorney general is using the Martin Act, a statute designed to protect New York investors and the integrity of the financial markets from fraud.”
Helios and Matheson acquired a majority stake in MoviePass in August of last year for $27 million. But MoviePass, which hit 3 million subscribers earlier this year, became popular enough that it burned through huge amounts of funding, but not popular enough to muscle its way into having leverage over theater chains.
For months, all signs have indicated that MoviePass is, well, not doing super hot. It has restricted its users now to a $9.95 monthly subscription plan with access to only three movies a month with limited selection—a far cry from its one-a-day offering of blockbuster hits during even peak moviegoing hours for the same price. In September, MoviePass sent emails to what it called a “select test group” of its former customers informing them they if they did not opt-in for its new plan, their accounts would be automatically be re-activated.
Helios and Matheson posted huge quarterly losses in August and was looking at a shareholder lawsuit that accused CEO Ted Farnsworth and CFO Stuart Benson of defrauding shareholders. The same month, Economist Carl Schramm resigned from Helios and Matheson’s board of directors. Specifically addressing Farnsworth in an open letter, Schramm said that he had for months “raised questions and expressed concerns about the corporate governance” of the company. He also claimed the company’s management “withheld material information from the Board for several months.”