What had seemed like a fool-proof idea, pay monthly to see unlimited movies at a participating theater, turned to be extremely tough to execute for the Helios and Matheson (OTC:HMNY) MoviePass. After a hectic few weeks for the management team as well as the shareholders. HMNY shareholders have come together to file a suit against the CEO and CFO after losing substantially after investing in the past few months.
Where do we start? First, Helios and Matheson posted an operating loss of $126.6 million in the last quarter. Essentially, the MoviePass subscription did not prove to be profitable at first. Originally the MoviePass was $9.95 per user monthly which would grant the user access to one movie a day at a participating theater.
Soon thereafter, Helios and Matheson made an announcement to up the price by $5 per user a month and keep the number of movies allowed the same. After backlash from the users and customers, they quickly changed their plan to keep the same price but bring back the number of movies allowed to only 3 a month.
Additionally, subscribers quickly realized they needed to still pay an extra $6 to $8 to see most new movies. Customers have also complained of not being able to cancel their subscriptions and getting charged after they have already cancelled.
On July 25th, HMNY was trading at $11 to $13 a share. Today it is trading at $0.0417. This was largely caused by a regulatory filing made by Helios and Matheson in reference to them not being able to make payments to their merchants. This also resulted in the MoviePass service shutting down momentarily.
The suit states it “is a federal securities class action on behalf of all investors who purchased Helios common stock between August 15, 2017, and July 26, 2018.” It also asserts that “MoviePass’ business model was not sustainable because there was no reasonable basis to believe MoviePass could monetize the model to a degree that could be maintained before being too buried in debt to survive.”
Queue Titanic music.