As MoviePass tries everything it can to survive its collapse — including limiting its users’ ability to see movies and automatically enrolling subscribers in its new plan — some people are even less happy than Moviepass patrons. Moviepass shareholders have filed a class action lawsuit against the company seeking compensation for their losses. Moviepass recently reported a quarterly loss of $126.6 million.
According to Deadline, shareholder Jeffrey Braxton filed in New York federal district court on behalf of the investors who have lost money because of allegedly misleading information about the company, its prospects, and its business practices. Parent company Helios and Matheson, CEO Ted Farnsworth, and CFO Stuart Benson were named in the suit (which you can read here).
The suit contends that, though Moviepass retains an outwardly positive facade, its business model simply can’t continue because it and parent company Helios lost so much cash and were continuing to do so. The company recently had to take out an emergency loan to keep the lights on during a service outage - after which the stock lost 96 percent of its value.
“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,” wrote Braxton attorney Mark Levine. The scattershot and myriad changes to the service in an attempt to find a way for its business to be profitable is just a result of how MoviePass has operated in the past, the suit contends.
“False and misleading statements or material omissions … caused the damages suffered by [Braxton] and the other class embers,” it reads. If this claim holds to scrutiny, it will be certified as a class action suit and possibly go to trial where shareholders could attempt to recoup their losses.
It seems the death knell of MoviePass is upon us, though the run it had was spotted with plenty of strange and experimental attempts to reinvent moviegoing. It also inspired major players like AMC to launch their own rival plans, so if nothing else, MoviePass has certainly changed the game.