The company transforming the way people watch movies may not be around long enough to reap its own benefits.

MoviePass majority shareholder Helios and Matheson Analytics Inc. HMNY, -20.00% was on top of the world last October, its share price shooting up to $32.90 from $2.50 in less than a month. The company had just amassed a large stake in the MoviePass service, which, under the Helios umbrella, was rapidly adding new members and winning praise from investors who saw the service as the next big thing in film viewing.

Helios & Matheson was a sleepy data analytics company when it acquired MoviePass, a service with just 20,000 subscribers at the time. After slashing the MoviePass monthly fee to $9.95 from up to $50 a month, its subscriber base ballooned, crossing the 3-million mark in June.

Letting people see a lot of movies for a little money doesn’t come cheap, however, and the company has burned through its cash holdings, disclosing in an April filing with the Securities and Exchange Commission that its average cash deficit was $21.7 million a month from September 2017 to April 2018. The company also disclosed that an auditor had expressed “substantial doubt” about the company’s ability to continue as a going concern.

“ “They’re giving away dollars for quarters. That’s just a terrible business model.” ” — Michael Pachter, managing director of equity research, Wedbush

Under the MoviePass model, members pay $9.95 a month to enjoy up to one movie a day. The company pays full price for each ticket that a subscriber orders, which means it’s almost impossible for MoviePass to make a profit from the subscription service itself. The more subscribers go to the movies, the more money the company loses.

But MoviePass has made it clear it isn’t banking on subscriber revenue to make itself profitable. Its hopes are pinned on the potential of user data. The company believes its rapidly-growing subscriber base will provide a trove of data that can be used to sell advertisements and help drive box-office revenue, allowing the company to strike revenue-sharing and bulk-ticket deals with studios and cinemas.

It is not working, analysts say.

“They’re giving away dollars for quarters,” said Michael Pachter, managing director of equity research at Wedbush Securities, in an email. “That’s just a terrible business model,” he said.

“They just didn’t price it right,” said Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management. He said the company needs to raise its fee to at least $20 or $25 to turn a profit, but acknowledged such a move would put the company at risk of losing subscribers.

“Clients hate it when you raise prices on them,” he said.

Pachter thinks MoviePass will be at a “structural disadvantage to exhibitors” like AMC AMC, -3.55% as long as it has to buy tickets at full price. AMC recently launched its own movie subscription service through its loyalty program AMC Stubs. Dubbed AMC Stubs A-List, the program gives users the option of seeing three movies a week for a monthly fee of $19.95.

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Pachter breaks it down like this: Exhibitors like AMC don’t need to pay the entire price of each ticket, the way MoviePass does. They only have to pay film rent, which averages around 54% of the ticket price. For a $10 ticket, AMC only has to pay $5.40. MoviePass, on the other hand, has to pay the full $10, already a few cents more than the company’s monthly membership fee.

If a subscriber sees two movies a month, AMC pays $10.80. That means that for a Stubs A-List subscriber who sees two movies a month, AMC makes $9.20, plus a 65% margin—normally 85%, but discounted 20% for Stubs members—on any concessions the subscriber buys. But a MoviePass user who sees two movies a month will cost the company $10 in losses. And there is no concession income to help offset that.

”We always knew our subscription side would lose or break even,” Helios and Matheson CEO Ted Farnsworth told MarketWatch. Critics “don’t understand our long-term plan,” he said, which “was always really about making money on advertising to studios, on data, on guaranteeing the box office.”

But Pachter doesn’t think the data MoviePass gets from its subscribers is worth much to advertisers or studios. “AMC has 15 million subscribers to its AMC Stubs program, meaning they have viewing data on 15 million people. They don’t list a line item from selling that data to studios, most likely because the studios don’t care,” he said.

“The studios aren’t yet buyers, and if they ever become buyers, they’ll go to the exhibitors first,” he added.

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Farnsworth disputes this. Studios are already paying MoviePass to advertise, he said, and he insists no single exhibitor has the kind of information MoviePass has.

“Our data is much more granular,” he said. “We know what time people go to the movies, what genres they like. We know that certain people go to AMC, but others go to Landmark or Regal. We know the different viewing habits they have across all channels,” he said.

In a June filing with the Securities and Exchange Commission, Helios and Matheson said it had just $18.5 million in available cash at the end of May, and its monthly cash deficit was growing. Since then, it has made a series of cash-raising moves: The company entered an agreement to issue 20,500 shares of preferred stock and $164 million in convertible notes, a form of short-term debt that converts into equity; it recently filed a shelf registration statement to raise $1.2 billion over three years by issuing equity and debt.

But that hasn’t been enough. Helios and Matheson said a “service interruption” occurred on Thursday due to its inability to make required payments to its vendors, according to a Friday Securities and Exchange Commission filing. The company is now trying to raise $6.2 million cash to pay its vendors.

Earlier this week, Helios and Matheson implemented a 1-for-250 reverse stock split, which analysts saw as a way to bolster its stock price. It a stock trades below $1 for 30 consecutive days, it is in danger of being delisted, according to Nasdaq rules. The split boosted the stock price to $21.25 from 8.5 cents, but the price fell to $3.50 just days later.

The company’s cost of revenue for the third quarter was $136 million, while total revenues came to $49.4 million, according to its most recent 10-Q filing with the SEC.

Jordan Neyland, an assistant law professor at George Mason University, ran the company’s latest financials through the Ohlson model, a financial formula that takes into account things like net income, current assets, and current liabilities in order to predict bankruptcy. Neyland found “a very high probability of bankruptcy, close to 99%,” he told MarketWatch, though the model in general can’t account for things like the probability of the company being bought out by a competitor.

At the same time, “burning cash at this point in the life cycle is fairly common,” said D. Brian Blank, an assistant professor of finance at Mississippi State University. He thinks if the company can get the funding it needs in the coming months, it will likely pull through.

MoviePass is working on diversifying its revenue streams. In January, it launched MoviePass Ventures with the goal of co-acquiring films with distributors. The plan, Farnsworth told MarketWatch at the time, was twofold: Use the MoviePass brand and platform to push people to theaters to see its co-owned films, reaping a share of box-office profits, and create greater potential downstream revenues on streaming, DVD and on-demand sales.

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The subsidiary has had mixed success so far. At Sundance, MoviePass Ventures co-acquired the independent film “American Animals” with distribution company The Orchard. In April, it took a stake in the mob boss biopic “Gotti,” starring John Travolta. Although “American Animals” opened to solid numbers, “Gotti” was slammed by critics, earning itself a rare 0% Rotten Tomatoes rating.

In addition to co-acquiring movies, Helios and Matheson is looking into producing its own films through its MoviePass Films arm. Farnsworth said he hopes to have lined up eight to 10 original movies by the end of the year.

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The Helios and Matheson CEO is unbothered by naysayers. He says he expects MoviePass will reach 5 million subscribers and break even by the end of 2018. He’s focusing on growth, he said, and expects to begin rolling out MoviePass in Europe and Asia by the end of the year.

“Whenever you’re disrupting an industry, you’re going to have things come up,” he said. “We are building an entertainment company. Nobody grows this big and this fast without hiccups.”

This article was originally published on July 9, 2018.