The financial woes continue for subscription service MoviePass. Parent company Helios and Matheson, CEO Ted Farnsworth, and CFO Stuart Benson are now being sued by shareholders over alleged false and misleading statements about its business prospects.
Deadline reports that shareholder Jeffrey Braxton filed the class action suit, claiming that he was misled by the company and suffered significant financial losses as a result. The suit claims the business model was unsustainable and that it was always inevitable that the parent company would run out of cash. It claims there was “no reasonable basis to believe” that MoviePass could monetize the model fast enough to maintain the business.
The company has been bleeding losses recently, having closed the most recent quarter with a reported operating loss of $126.6 million. HMNY has remained between $0.03 and $0.08 for the last week, after having fallen sharply in late July.
The sharpest stock drop came the week after the release of Mission Impossible: Fallout, when money problems with the subscription service led to it restricting tickets to blockbuster movies. It subsequently announced a change that would deny access to big new releases, then quickly changed course to offering access to new releases but only to three movies per month. Most recently, a report surfaced that MoviePass was subtly signing users back up after they had cancelled.