Helios is a former data analytics company that was run by Defendant Farnsworth as Chief Executive Officer, and by Defendant Benson as Chief Financial Officer. Helios announced that it was acquiring a majority position in MoviePass Inc. (“MoviePass”), a subscription-based movie ticket service, on August 15, 2017, which provided a new primary line of business for Helios. At all relevant times, Defendant Lowe served as Chief Executive Officer of MoviePass.
Lead Plaintiff alleges that the merger between Helios and MoviePass provided a whirlwind of investor excitement and media coverage for Helios, whose other lines of business had deteriorated over the preceding several years and resulted in mounting losses. Although MoviePass itself had sustained material losses before the merger when charging as high as $75 per month, the Individual Defendants introduced a new monthly price of just $9.95 in connection with merger while touting the combined Company’s prospects and purported revenue possibilities. Plaintiffs allege that the Individual Defendants violated the federal securities laws throughout the Class Period by misrepresenting MoviePass’s prospects for Helios, and concealing the likelihood of disastrous losses incurred by MoviePass operations and the Company’s $9.95 per month business model.
Plaintiffs allege that the market learned of Defendants’ alleged misrepresentations and omissions over a series of eight (8) statistically significant corrective disclosures that caused the Company’s stock price to plummet from a historic high of $32.90 in October 2017, to less than a penny by the end of the Class Period, when accounting for a 250-for-1 reverse split. These statistically significant corrective disclosures occurred on: (i) October 11, 2017, when Helios announced risk factors related to its merger with MoviePass; (ii) December 12, 2017, when Helios announced a public offering of newly issued common stock and warrants; (iii) February 12, 2018 when Helios announced a public offering of newly issued common stock and warrants; (iv) after market close on April 18, 2018 when Helios announced an at-the-market public offering of newly issued common stock, and before market open on April 19, 2018 when Helios announced a public offering of newly issued common stock and warrants; (v) before market open on May 8, 2018, when Helios filed a Form 8-K with the United States Securities and Exchange Commission (“SEC”) announcing lower than expected cash on hand; (vi) June 19, 2018, when Helios filed a Schedule 14A Proxy Statement with the SEC to seek approval of shareholders to authorize the Company to increase the number of its common stock from 500 million to 2 billion, and to approve a 250-for-1 reverse stock split; (vii) July 24, 2018, when Helios announced it had effectuated the 250-for-1 reverse stock split; and (viii) July 26, 2018, when Helios announced it had issued a demand note in the principle amount of $6.2 million because it was not able to make required payments to merchants and fulfillment processors.
On August 2, 2018, a purported securities class action was filed in the United States District Court for the Southern District of New York captioned Chang v. Helios and Matheson Analytics, Inc., et al., No. 18-6965 (S.D.N.Y) (the “Chang Action”) on behalf of all investors who purchased or otherwise acquired Helios common stock between August 15, 2017 and July 26, 2018. On August 10, 2018, 2018, a similar action captioned Braxton v. Benson, et al., No. 18-7242 (S.D.N.Y.) (the “Braxton Action”) was also filed in this Court seeking the same relief on behalf of the same defined class.
On November 16, 2018, the Court issued an Order: (i) consolidating the Chang and Braxton Actions; (ii) appointing the Helios and Matheson Investor Group as Lead Plaintiff; (iii) appointing Levi & Korsinsky, LLP as Lead Counsel; and (iv) directing Lead Plaintiff to submit a consolidated amended complaint by January 4, 2019.
In an order dated November 27, 2018, and entered on November 28, 2018, the Court, among other actions, amended the case caption of the consolidated Chang and Braxton Actions and ordered that every subsequently-filed pleading bear the case name: In re Helios and Matheson Analytics, Inc. Securities Litigation.
On January 4, 2019, Lead Plaintiff filed the Amended Class Action Complaint. On January 8, 2019, Lead Plaintiff filed a corrected Amended Class Action Complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and SEC Rule 10b-5 promulgated thereunder, against Defendants, on behalf of itself and all other persons or entities who purchased or otherwise acquired publicly traded common stock of Helios between August 15, 2017 and July 26, 2018 (the “Class Period”), inclusive, and were damaged thereby (the “Class”).
Defendants filed a motion to dismiss the Amended Class Action Complaint on February 25, 2019.
On April 3, 2019, Lead Plaintiff filed the Second Amended Class Action Complaint. Defendants filed a motion to dismiss the Second Amended Class Action Complaint on May 24, 2019. On July 15, 2019, Lead Plaintiff opposed Defendants’ motion to dismiss and, concurrently, moved the Court for leave to supplement the Second Amended Class Action Complaint.
On August 6, 2019, the Court denied, without prejudice, both Defendants’ motion to dismiss, as well as Lead Plaintiff’s motion for leave to supplement the Second Amended Class Action Complaint. The Court also ordered Lead Plaintiff to submit an amended complaint by August 16, 2019.
On August 16, 2019, Lead Plaintiff filed the operative Third Amended Class Action Complaint (the “Complaint”).
On September 11, 2019, Defendants filed a motion to dismiss the Complaint which Lead Plaintiff opposed on September 27, 2019. On October 11, 2019, Defendants filed a reply in further support of their motion to dismiss.
On January 28, 2020, the Company filed a voluntary Chapter 7 Petition in the United States Bankruptcy Court for the Southern District of New York, of which the Company advised the Court on January 30, 2020. On January 30, 2020, the Court ordered that this Action be stayed as to the Company only, but allowed the case to proceed against the Individual Defendants.
On June 2, 2020, Lead Plaintiff moved the Court for limited relief from the Private Securities Litigation Reform Act of 1995 (“PSLRA”) automatic discovery stay, which the Individual Defendants opposed on June 16, 2020. Lead Plaintiff filed a reply in further support of their motion on June 23, 2020. On July 16, 2020, the Individual Defendants filed their sur-reply in further opposition to Lead Plaintiff’s motion for limited relief from the PSLRA.
On July 30, 2020, Lead Plaintiff gave a presentation to the Individual Defendants’ insurance carriers regarding Lead Plaintiff’s settlement position. On September 16, 2020, Lead Counsel and counsel for the Individual Defendants engaged in a full-day mediation session before David Murphy, Esq., of Phillips ADR, a well-respected and highly experienced mediator. Counsel for the Bankruptcy Trustee and various insurance carriers also attended the mediation. In advance of the mediation session, Lead Plaintiff, the Individual Defendants, and the insurance carriers exchanged detailed mediation statements along with supporting exhibits. Lead Plaintiff and the Individual Defendants ended the September 16, 2020 mediation without reaching a resolution of the Action. In the weeks following the mediation, Lead Plaintiff and the Individual Defendants continued to negotiate a possible settlement. On October 5, 2020, the Parties agreed to Mr. Murphy’s personal mediator’s double-blind proposal to resolve the claims in the Action.
On October 6, 2020, Lead Plaintiff and the Individual Defendants notified the Court that Lead Plaintiff and the Individual Defendants had agreed in principle to resolve all issues and claims involved in this Action.
On October 13, 2020, the Court held a teleconference regarding outstanding motions and ordered that Lead Plaintiff’s pending motion for limited relief from the PSLRA stay and the Individual Defendants’ pending motion to dismiss be withdrawn without prejudice to renewal, pending approval of a forthcoming proposed settlement.