Moviepass is under investigation in the state of New York for allegedly misleading its investors. The movie subscription service had apparently lied about their financial status. The company can’t seem to catch a break. The investigation is being led by New York’s Attorney General Barbara Underwood. Helios and Matheson is the parent company of Moviepass that is being investigated.

Underwood tweeted, “We’ve launched a securities fraud investigation into @MoviePass’ parent company. My office is committed to protecting New York investors and the integrity of our financial markets.”

The investigation will examine whether Helios and Matheson actually lied about their financial situation to their investors. Underwood is acting on behalf of the Martin Act, which is considered the most strict blue sky law in the US. The Martin Act enables the Attorney General to investigate cases of fraud in the state of New York. Helios and Matheson were quick to respond that they were fully aware of the investigation and were willing to cooperate.

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Helios and Matheson further added that they have fully disclosed their finances publically and in a timely fashion, without any ill intent. The company is prepared to defend itself in front of the Attorney General.

Moviepass has caused a lot of issues for Helios and Matheson, as the movie subscription company hemorrhaged cash. This was due to the company’s unsustainable business model. Moviepass had to frequently adjust its subscription plans.

The company even had to take loans to pay the expenses. This caused Moviepass’s stocks to plummet to the ground. In August, Helios and Mathos revealed a loss of $100 million in the second quarter of 2018, which meant it would be out of resources within months.

Moviepass initially offered unlimited movies which made the company an overnight success. This came at a cost. This caused the company to face extreme losses. To overcome their losses, Moviepass decided to increase monthly subscription fees to $14.99, which rightly pissed off a lot of its customers.

The movie subscription service later reverted the price to $9.95. Currently, users can only view 3 movies per month at a $9.95 monthly fee. This made Moviepass’s business model much more practical. A lot of customers were upset as they wanted the unlimited movie plan back. As you can imagine, it hurt customers to go from watching unlimited movies to just three.

Despite all the measures, Helios and Mathos’ stocks continued freefalling. The company’s 1.5 billion shares were being traded at an estimated value of $30 million. Moviepass is no different from a tech startup in its infancy.

It continues growing massively yet keeps on taking heavy losses. The company still hasn’t figured out how to cut deals with movie theaters to buy tickets in bulk at discounted prices. Currently, they are paying full price for each ticket they buy. This is what is causing it to dive into such a massive financial crisis. The 3 movies per month plan is still not a bad plan. Customers will still be in net profit as a single movie can go for 10 to 15 dollars. Let us hope Moviepass can stay afloat and offer its customers more flexible and valuable plans.