The parent company of embattled subscription movie ticket service MoviePass faces a pair of class-action lawsuits from shareholders alleging the company misled them about its financial prospects.
Filed in federal district court in New York, the lawsuits both claim that Helios and Matheson failed to disclose the extent of MoviePass’ financial losses while plugging the company’s future business prospects. The company also stands accused of releasing fabricated or misleading financial information.
“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,” a lawsuit filed on behalf of shareholder Jeffrey Braxton said.
Earlier this week, Helios and Matheson reported a second-quarter operating loss of $126.6 million. MoviePass, which began as a subscription service that allowed subscribers to watch an unlimited number of movies for a monthly fee, recently imposed a three-movie limit in a bid to cut down on its losses.
Helios and Matheson shares were trading for less than a penny each on Thursday. The company’s stock has lost 99% of its value since June, when it revealed in a filing that it was losing so much cash that it was unable to pay merchants.
CEO Ted Farnsworth told FOX Business on Wednesday that the company has cut down its cash deficit to about $12 million per month, adding that MoviePass now has more than 3 million subscribers.
MoviePass has faced strong criticism from other movie ticket vendors, especially AMC, which has repeatedly called the service’s business model unsustainable. AMC launched its own monthly ticket subscription service in June.