MoviePass Parent Company Under Investigation in New York After Fraud Accusation

Shareholder accused Helios and Matheson Analytics of fraud and presenting misleading information about its financial standing in August lawsuit

Last Updated: October 18, 2018 @ 11:06 AM

The New York Attorney General’s office has opened a probe into Helios and Matheson Analytics Inc, owner of MoviePass, to determine if the company misled investors about its finances.

CNBC reports that the investigation is still in early stages. A spokesperson for the New York Attorney general’s office declined to comment, but told TheWrap a statement is forthcoming, likely before Friday.

“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement provided to TheWrap. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors.  We look forward to the opportunity to demonstrate that to the New York Attorney General.”

Helios and Matheson was accused in August of defrauding shareholders with misleading information about the company’s financial standing in a lawsuit filed by Jeffrey Braxton against CEO Ted Farnsworth and CFO Stuart Benson.

Later that same month Helios and Matheson board member Carl J. Schramm resigned from his seat, saying that the ticketing company withheld important financial information and made influential decisions without the board’s input.

Helios and Matheson stock has fallen more than 99 percent in the last three months (It has rebounded slightly, gaining 35 percent in the last 30 days). In the company’s most recent second quarter earnings report, it reported a loss of more than $100 million during the quarter.

The company has borrowed millions a dollars to keep afloat since cutting the price of MoviePass to just $10 in August of 2017.

In a SEC filing earlier this month, the company said it raised $65 million in August and September through sales of Helios and Matheson common stock pursuant to its at-the-market offering under the equity distribution agreement and prepayments by investors of existing investor notes.

Shares of Helios and Matheson still sit below $1, dangerous territory for a publicly traded company. If Helios & Matheson isn’t able to lift the share price above $1 by Dec. 18, it will be delisted from the Nasdaq exchange. And though there’s not a one-to-one causation for delisted companies going bankrupt, according to the SEC website, “In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange.”

Shareholders will vote Tuesday on whether to approve a reverse stock split — its second in a matter of months — in an attempt to bolster the company’s shares and put off being delisted.

Pamela Chelin contributed to this report.