The headlines coming out of the struggling movie subscription service MoviePass in recent months have been a confusing assortment of tweaks to its plan terms, as well as financial moves behind the scenes to compensate for massive losses and subscriber churn. It’s all contributed to the story of a company in distress — of a company on death watch, even, depending on who you ask — and now comes even more bad news: New York Attorney General Barbara Underwood has reportedly opened a fraud investigation into Helios and Matheson, MoviePass’ parent company.
A person familiar with the matter confirmed the existence of the investigation to CNBC, which learned that the focus is on whether the company misled investors about its financials. Underwood’s office is also reportedly relying on the Martin Act, “a statute designed to protect New York investors and the integrity of the financial markets from fraud.”
It’s the latest in a dizzying flurry of bad news for the company, which lost $100 million in the second quarter and has been taking out loans to make up for its losses. Some recent reporting about the company has even speculated it could drain the rest of its assets in coming months, and Helios and Matheson’s stock has also seen almost all of its value evaporate.
The service, a kind of middleman between patrons and cinemas which started off letting subscribers go to the movies to see one film a day for a little less than $10, got popular fast. That popularity apparently overwhelmed the venture, which then executed a series of poorly received moves like raising prices and putting a lid on the number of films users could see a month. Head to the Moviepass website today, and you can sign up for a $9.95 plan that gives you three movies a month, which includes both blockbusters and independent titles and purportedly gives you access to 91 percent of movie theaters in the US. A strip of titles at the bottom of the page also shows you what movies are being supported by MoviePass’ plan at the moment.
“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement to CNBC. “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.”