The Chosen studio accused of squeezing out small-time investors

Per the Times, Garabedian expected to be a long-term shareholder in the company, and accused the company of understating potential future earnings while taking the company private. The Chosen became more financially successful over time, playing in movie theaters; season five grossed $40 million alone, according to Puck. Per the outlet, the upcoming final seasons—which will focus on the climactic crucifixion and resurrection of Jesus—and their follow-up movies and TV shows were expected to generate $1.4 billion in revenue between now and 2029, which would make for an enterprise value of about $150 million. 

But when 5&2 chose to cash out its investors, the enterprise value fell to $52.9 million after an analysis from Goldman Sachs; investors were then cashed out at $3.75 per share. What’s more, Garabedian alleges that 5&2 held the vote for the reverse stock split during Holy Week, knowing that most of its obviously devout investors would be busy with other things; per the Times, 80% of minority shareholders missed the vote. The suit also alleges that 5&2 used funds that were supposed to be used for the final season of the show to cash out its investors. In a statement to the Times, 5&2 Productions co-founder Dallas Jenkins denied any wrongdoing. 

The production and financial model of The Chosen has garnered attention basically since its inception. According to an article published in The Hollywood Reporter in early 2019, The Chosen used equity crowdfunding to raise millions, initially selling shares of the production for $1 per piece. Equity crowdfunding differs from donation-based crowdfunding in a key way; donations to a business are treated as taxable income, while money raised through equity crowdfunding is treated as investment capital and generally not taxed. With The Chosen, shares could not be sold until all of the investors earned 120% of their investments, but THR reported at the time that they would own the equity in perpetuity. Apparently, they didn’t, but The Chosen sure seems to have gotten a lot of investment capital.