A former board member at MoviePass’s parent company, Helios and Matheson Analytics, is raising concerns about the company’s corporate governance.
Carl Schramm resigned from the board in a letter dated Aug. 25, alleging that management withheld information and made crucial decisions without informing the board in the recent weeks.
“Management apparently has made a number of important corporate decisions and executed significant transactions either without board knowledge or approval, or in board meetings initiated with only a few hours of advance notice by email,” the letter from Schramm said. In at least one instance, Schramm said he didn’t learn about the meeting until after it ended.
“Just last week, I learned that management withheld material information from the Board for several months,” the letter added.
That appeared to be the final straw. Schramm said he had also been asking, ”often unsuccessfully,” for several months for explanations of the company’s strategy, financials, and operations.
Helios announced Schramm’s resignation in a filing on Thursday, Aug. 30. The company said in the filing that no information had been withheld from the board, and that it was unaware of any unanswered requests for information from Schramm. The board and committees Schramm was a member of met 25 times so far this year, Helios added.
Schramm, an economist, entrepreneur, and professor at Syracuse University, was appointed to Helios’s board of directors in November 2016, when the firm completed a merger with tech startup Zone Technologies, which created a crime mapping app called RedZone. Its founder Ted Farnsworth later became CEO of Helios and spun off Zone.
Helios, a consultancy firm, is mainly in the MoviePass business now. It took a majority stake in the movie-ticket subscription service in August 2017, around the time MoviePass slashed the price of its movie-per-day subscription to $9.95 per month. In the year since, MoviePass has grown from about 15,000 subscribers to 3.2 million, and shouldered hefty losses, which has dragged on Helios’ stock price. Shares of Helios have fallen to $0.02 from $0.08 a month ago. The company now owns about 92% of MoviePass.
Helios has taken drastic steps to get back on track financially, including filing plans to raise up to $1.2 billion in equity and debt over the next three years, holding a reverse stock split to avoid being delisted from the NASDAQ, and taking on an expensive short-term loan. In August, MoviePass also pared back its offering to include three movie tickets per month for a limited selection of six or so films per day.
But attention to the subscription service, which is upending ticket buying and still boasts millions of loyal fans, has also brought likely unwanted attention to its parent company. Business Insider reported that the company emerged from, and still appears to have ties to, an Indian provider of IT services that stands accused of defrauding thousands of creditors.