MoviePass has been having a rough go of late as the movie ticket subscription service tries to find a business model that keeps the company sustainable. Now MoviePass has even more problems. The service's parent company Helios and Matheson just posted a quarterly loss of over $126 million for the second quarter of 2018, and if that wasn't enough, the company is also being sued by shareholders.
Shareholder Jeffrey Braxton filed a class action lawsuit on Monday against Helios and Matheson claiming that shareholders in the company were misled regarding the company's business and its prospects. As a class action suit, hundreds or thousands of people could potentially become plaintiffs in the case. The suit seeks to recover the losses that shareholders suffered as a result of what the complaint calls "false and misleading statements or material omissions" from the parent company. Helios and Matheson, CEO Ted Farnsworth and CFO Stuart Benson are all named in the suit.
According to Deadline, the suit appears stems from the incident in late-July where MoviePass stopped working for all subscribers. It was later revealed that MoviePass had needed a massive cash infusion in order to be able to afford its merchants. Since then, MoviePass implemented one major change to its structure, that was then rolled back and replaced by a second new set of policies when the first set turned out to be unpopular with subscribers.
MoviePass very likely has a lot of angry shareholders right now, as the company's stock closed at a value of $.05 a share yesterday. The stock has dropped below $1 per share twice in the last couple months, even after a reverse stock split was instituted in order to bolster share value. At this point, MoviePass quite literally isn't worth very much.
Part of this is certainly due to the fact that a significant number of people have canceled the service in recent days, or at least tried to, as some reports have indicated that MoviePass may have "uncancelled" some subscribers. MoviePass instituted a peak pricing policy that charged users a premium for some movies while blacking out others from being accessible via the MoviePass app. While MoviePass' new program removes peak pricing as well as most blackouts, MoviePass' cancellation policy prevents somebody who ends their subscription from reactivating it for nine months, so the people who are gone are going to be gone for a while, even if the policy changes have made the service enticing again.
It seems that everywhere MoviePass turns it runs into more problems, and between the significant operating loss and now a lawsuit, things are continuing to get worse before they have a chance to get better. Whether or not they actually will get better remains to be seen.