The company MoviePass shot up in popularity among moviegoers over the past year, but it has since seen its success come tumbling down. MoviePass is a subscription service in which patrons in Tennessee and across the nation were able to pay a monthly fee and use an app on their mobile phone to check into one movie theater per day. However, the company took a hit when it imposed a limit of three movies per subscriber each month. In addition to its financial losses, the parent company of MoviePass is also in legal hot water.
Shareholders of the parent company of MoviePass, have filed two class-action lawsuits claiming the company misled them about its financial projections. Per the two legal filings, Helios and Matheson, the parent company of MoviePass, did not let shareholders know it was experiencing financial losses, but continued to tout the business’s future financial prospects. In addition, Helios and Matheson is being accused of releasing financial information that was misleading or made up entirely.
Since June, the value of Helios and Matheson shares saw a loss of 99 percent, and the company is reportedly unable to pay merchants. This is despite the fact that the business has over 3 million subscribers. In addition to criticism from shareholders, movie ticket vendors have also criticized the company, claiming its business model was unsustainable.
Shareholder disputes such as this show that sometimes a company can be accused of not being 100 percent transparent to its shareholders, leading to business litigation. Accusations not only affect shareholders but can also affect a business’s operations and viability. Sometimes, the parties are able to resolve their legal issues through arbitration or other alternative dispute resolution processes. Other times, however, the case will need to be litigated. When this happens, it is important that businesses have the legal guidance necessary to make informed decisions that are in the business’s best interests.