Fraud probe a new MoviePass anticlimax

MoviePass is being probed by New York Attorney General Barbara Underwood, whose office is looking at whether the company misled investors about its finances, sources said.

The attorney general’s office is specifically looking into Helios and Matheson, the corporate parent of the cash-strapped movie subscription service, a source said Wednesday.

The investigation has been filed un- der the Martin Act, a New York statute designed to combat fraud and protect investors. CNBC first reported the investigation.

“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement.

The company took a controlling stake in the movie app in August 2017 and introduced the now-infamous $9.95-per-month rate to see an unlimited number of films in theaters.

The cheap rate allowed MoviePass to go from 20,000 to 3 million subscribers in under a year, but it also resulted in an unstoppable cash burn. In August, Helios reported a $127 million loss.

Over the past few months, MoviePass has gone off-line several times because of Helios’ cash crunch, which forced the company to take out a $5 million emergency loan to continue a modified film offering to subscribers.

It changed MoviePass to a threemovie-per-month service, compared with its original movie-a-day offering.

Shares of Helios and Matheson have tumbled nearly 100 percent since reaching their all-time high in October 2017 and have been trading at less than $1 since late July. Helios shares are now worth 2 cents. The company on Tuesday postponed until Nov. 1 a stockholder vote on a proposed 1-for-500 reverse stock split. The reverse split was originally scheduled to take place on Thursday.