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(AP Photo/Darron Cummings)
Helios and Matheson Analytics, the company behind the subscription-based movie ticket provider MoviePass, is under investigation by the office of the New York Attorney General for allegedly misleading investors about MoviePass’ financial sustainability. Attorney General Barbara Underwood’s probe seeks to find whether Helios and Matheson violated the Martin Act, an anti-fraud measure meant to protect New York investors and financial markets.
MoviePass initially picked up more than 3 million subscribers with its attractive $9.95 per month plan, which allowed subscribers to see one movie per day. At its peak, the value of Helios and Matheson hit an estimated $4,500 per share – but this success would ultimately prove too good to be true. In July of this year, Helios and Matheson declared in an SEC filing that it had not made enough profits to pay its merchants resulting in severe subscriber service adjustments, including a limited movie selection, a significantly reduced monthly movie quota, and increased monthly prices. Helios and Matheson shares have dropped to a value of just 2 cents per share, as of today.
Interpretations of the Martin Act have covered a variety of fraud-related activities, allowing the New York Attorney General to investigate a company for any potentially deceitful practice. Any activity that can be seen as misleading or false promise-making to investors may provide grounds for an investigation. Further, the state of New York is not required to prove active intent or knowledge of fraudulent activity on behalf of the company in order to establish a conviction. Whether or not Helios and Matheson intended to deceive investors, the company can be convicted of securities fraud if the probe finds substantial evidence for insufficient financial accountability and transparency.
MoviePass had encountered significant legal troubles before the Attorney General’s Probe: just this August, shareholder Jeffrey Braxton hit Helios and Matheson and several top executives with a class action lawsuit alleging the company had failed to properly inform investors about the shortcomings of its business model. That same month, economist Carl Schramm resigned from the company’s board of directors, claiming similarly that Helios and Matheson was not being financially transparent with the board.
Helios and Matheson have responded that they intend to cooperate with the investigation, and prove their financial transparency and responsibility to investors. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors,” they stated. Compounded with all of MoviePass’ other troubles, the probe may just be the final nail in the coffin for the company.
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(AP Photo/Darron Cummings)
Helios and Matheson Analytics, the company behind the subscription-based movie ticket provider MoviePass, is under investigation by the office of the New York Attorney General for allegedly misleading investors about MoviePass’ financial sustainability. Attorney General Barbara Underwood’s probe seeks to find whether Helios and Matheson violated the Martin Act, an anti-fraud measure meant to protect New York investors and financial markets.
MoviePass initially picked up more than 3 million subscribers with its attractive $9.95 per month plan, which allowed subscribers to see one movie per day. At its peak, the value of Helios and Matheson hit an estimated $4,500 per share – but this success would ultimately prove too good to be true. In July of this year, Helios and Matheson declared in an SEC filing that it had not made enough profits to pay its merchants resulting in severe subscriber service adjustments, including a limited movie selection, a significantly reduced monthly movie quota, and increased monthly prices. Helios and Matheson shares have dropped to a value of just 2 cents per share, as of today.
Interpretations of the Martin Act have covered a variety of fraud-related activities, allowing the New York Attorney General to investigate a company for any potentially deceitful practice. Any activity that can be seen as misleading or false promise-making to investors may provide grounds for an investigation. Further, the state of New York is not required to prove active intent or knowledge of fraudulent activity on behalf of the company in order to establish a conviction. Whether or not Helios and Matheson intended to deceive investors, the company can be convicted of securities fraud if the probe finds substantial evidence for insufficient financial accountability and transparency.
MoviePass had encountered significant legal troubles before the Attorney General’s Probe: just this August, shareholder Jeffrey Braxton hit Helios and Matheson and several top executives with a class action lawsuit alleging the company had failed to properly inform investors about the shortcomings of its business model. That same month, economist Carl Schramm resigned from the company’s board of directors, claiming similarly that Helios and Matheson was not being financially transparent with the board.
Helios and Matheson have responded that they intend to cooperate with the investigation, and prove their financial transparency and responsibility to investors. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors,” they stated. Compounded with all of MoviePass’ other troubles, the probe may just be the final nail in the coffin for the company.
