The parent company of ticker service MoviePass, Helios and Matheson, is reportedly being investigated for misleading investors.
According to a CNBC report, New York Attorney General Barbara Underwood has launched an inquiry to examine the company’s financial disclosures under the Martin Act. The Martin Act is a New York anti-fraud law, which is considered by many to be the most severe blue sky law in the country.
Underwood tweeted, “We’ve launched a securities fraud investigation into MoviePass parent company. My office is committed to protecting New York investors and the integrity of our financial markets.”
The investigation is in the early stages but if Underwood finds instances of fraud, it could result in civil or criminal charges fo the company. Helios and Matheson has confirmed that there is an investigation but has denied it has done anything wrong. The company stated, “We are aware of the New York Attorney General’s inquiry and are fully cooperating. 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.”
MoviePass became popular initially when it offered a subscription that allowed moviegoers to see a film a day for $9.95 per month. While the idea sounded amazing, it was not great for the company’s profits and the plan was altered. Available movies became limited, monthly prices went higher, and the company also restricted the number of movies users could see per month.
In August the company reported second quarter financial results revealing a loss of $100 million in quarter. The company posted a gross loss of $104.6 million, compared to a gross profit of $223,000 in the year ago quarter.
MoviePass recently announced that it had received another $65 million in funding and had said it was thinking about making acquisitions in the near-term. The stock has lost more than 99% of its value in the last year.