Barbara Underwood, the New York Attorney General, has launched an investigation into Helios and Matheson, the MoviePass parent company.
CNBC, citing a person familiar with the matter, reported the New York AG’s office is looking to see if Helios and Matheson misled investors about its financials; the investigation is in the beginning stages at this point. CNBC reported Underwood’s office is relying on the Martin Act, which is a rule aimed to protect investors in the state of New York and the financial markets from fraudulent claims. “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.”
This is yet another blow for the parent of MoviePass, which has been struggling to get the movie subscription service right. It has adjusted the plans in recent months and has had to take out expensive loans to stay afloat. For the second quarter it had a loss of $100 million. MoviePass parent Helios and Matheson’s shares have fallen from a price of more than $2 in January to two cents in late August. In June, NASDAQ informed the company that its shares could be delisted from the exchange if it does not go back up to $1 per share or more by Dec. 18.
At the same time that MoviePass is struggling, its rival AMC Theater’s subscription service is booming. In late September AMC said its AMC Stubs A-List, which launched three months ago, has seen membership sign-ups from August and September outpace the company’s expectations, with more than 380,000 moviegoers now part of the subscription service. In a press release at the time, the company said the member count has increased by 120,000 during the past six weeks.