It’s been a rough few weeks for MoviePass, and its parent company Helios and Matheson (HMNY), but it looks like things aren’t going to be getting easier any time soon. The company has just been hit with a class action lawsuit that will only add to its ever-growing list of financial woes.
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Deadline reports that HMNY shareholders have banded together and filed a suit against the company for compensation, after losing a substantial amount of money in the recent months. The lawsuit was filed against Helios and Matheson, CEO Ted Farnsworth, and CFO Stuart Benson.
The suit comes after HMNY posted an operating loss of $126.6 million this past quarter. The company closed Monday at a frighteningly low $0.05.
Jeffrey Braxton, one of the company’s shareholders, filed the suit in New York on Monday, speaking for hundreds of investors who lost money in the venture. Those that put stock in the company feel as though they were misled and lied to about the MoviePass business model. The suit suggests that the model couldn’t be sustained, and that Helios running out of money was inevitable.
“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,” wrote attorney Mark Levine in the suit.
“False and misleading statements or material omissions…caused the damages suffered by [Braxton] and the other class members,” the suit continues.
Not only do the investors in the company feel lied to about the current state of MoviePass, but its subscribers have been experiencing very similar situations. It began with the failed “peak pricing” debacle, where users were initially told they may pay more money for movies that were in high-demand, but it quickly turned to $6 and $8 charges for nearly every movie in theaters. This culminated in a blackout of the app when Mission: Impossible – Fallout was released, and MoviePass needing to borrow money to stay afloat.
As recently as this week, MoviePass customers have complained that the company has been re-subscribing them after they’ve cancelled the service. In some instances, users have been given “error” messages when trying to get rid of their account, keeping them from dropping the month-to-month subscription.
Do you think MoviePass will last much longer under these circumstances? Will the lawsuit drive the company even further into debt? Let us know your thoughts on the matter in the comments!
