Helios and Matheson Analytics Inc (NASDAQ: HMNY ) plunged again on Thursday. HMNY stock is down 33% as of this writing following its latest equity offering. The majority owner of the MoviePass movie ticket service is running into increasingly grave problems. While the stock’s decline is especially dramatic and may seem like a buying opportunity, here are the five reasons why you should steer clear of HMNY here.

Movie Theaters Have The Leverage

Helios and Matheson has offered various explanations for how they would eventually reach profitability. One such model was going after users in cities with cheaper tickets. The CEO explained it last year as follows: “We need to offset costs in Manhattan and L.A. by getting a lot of people in Kansas City and Omaha and places where the average ticket price is five or six bucks to sign up”. Naturally, though, customers are more motivated by Moviepass’ fixed price in high-cost metro areas.

The company also has suggested that selling customers’ data and arranging directed advertising will lead to revenues. But it’s unclear how effective this will be, particularly in light of data privacy scandals at Facebook, Inc. (NASDAQ: FB ) and elsewhere.

The main route to profitability always seemed to be splitting revenues with the theaters. Helios and Matheson had wanted $3 from each ticket sold at AMC Entertainment Holdings Inc (NYSE: AMC ) along with a cut of concession revenues. It’s worth remembering that the movie producer, not the theater, gets the lion’s share of revenues off ticket sales. So concessions are the key to running a profitable theater chain, and AMC, not surprisingly, resisted MoviePass’ demands for a cut of its main profit stream.

In fact, rival chains are rolling out their own subscription offerings to fend off Moviepass. Cinemark Holdings, Inc. (NYSE: CNK ), for example recently unveiled a monthly subscription offering that gives customers discounted movie tickets and 20% off concessions.

MoviePass Is Watering Down Its Service

MoviePass has existed since 2011, but until recently didn’t attract much attention. Why? Its previous pricing model was a tiered pricing system with even the lowest level above $10/month. Not surprisingly, subscription growth was subdued. When Helios and Matheson acquired the majority of Moviepass, however, they cut prices dramatically and offered customers unlimited tickets. Customers flocked to the new offering.

But the pricing isn’t rational. In big cities, even one movie ticket often costs more than $9.95. MoviePass was necessarily losing gobs of money unless customers subscribed and then forgot about it. With the losses mounting, MoviePass is walking away from its former promise of unlimited.

It has now unveiled a new pricing scheme where it offers just four movies a month to customers for $9.95 plus a 3-month free trail of iHeartRadio All-Access. That online radio streaming service might be of value to some people, but I’d guess most movie buffs either don’t want a music subscription, or are already with Spotify Technology (NYSE: SPOT ). So, in essence, Moviepass just went from unlimited to four movies a month at the same price point. That’s a pretty big drop-off.

It makes Cinemark’s subscription offer far more competitive, since it gives you discounts on tickets and concessions. And there are no quirks like you have where MoviePass changes which theaters are eligible (as happens quite often).

Probably Not The Next Netflix

The bull case on HMNY hammers on the following point: This could be the next Netflix, Inc. (NASDAQ: NFLX ). And sure, if MoviePass ramped its subscriber base to anything like Netflix’ and didn’t have to give away tickets far below cost, they would have a point. But as we’ve seen, MoviePass is already having to curtail their offer to slow the cash burn. Subscriber growth should slow way down going forward.

More importantly, there’s a big fundamental business model difference here. Movie producers had long relied on Blockbuster to distribute their DVDs to consumers for rental. Walt Disney Co (NYSE: DIS ) had no interest in running movie rental shops. So, in effect, Netflix replaced one middleman with another providing the same function in the supply chain.

On the other hand, MoviePass isn’t essential to the movie business. Walt Disney distributes its movies to theaters, theaters sell tickets for a minimal profit, and sell popcorn for its main income. Everyone is happy. If consumers want a subscription service, Cinemark can sell them one. MoviePass is trying to add another middleman to a process that was already working fine. In capitalism, unnecessary bits of friction are usually eliminated, not embraced.

Theaters: Running MoviePass Out Of Time

HMNY stock bulls have been surprised that cinemas haven’t given more ground to the company. But the reasoning for that is explained above – if there’s a natural operator of a subscription plan, it’s the cinema itself. If you are AMC or Cinemark, why let MoviePass build a multi-billion business on the back of your operations? If you refuse to cede ground, MoviePass goes away, and you can take the market with your own offering.

That’s what we’re seeing play out now. MoviePass’ auditor announced that it had substantial doubts that the company can continue as a going concern. That’s code language for saying it could go bust. That led to this week’s latest stock offering. Essentially, HMNY is selling more of its stock to the public so it can keep giving customers vastly underpriced movie tickets. Simple logic should dictate who is getting the better end of the deal here.

Toxic Financing

This latest offering is selling around $30 million of HMNY stock to investors at $2.75/share. It also gives them warrants. Most importantly, it gives the underwriter the ability to sell $150 million in new HMNY stock going forward.

Wall Street often refers to this sort of deal as “death spiral” financing. The lower the stock goes, the more stock the company has to sell to raise money. Think about it, if HMNY is at $3, they have to sell 50 million shares to hit $150 million. If HMNY stock is at $1.50/share, they have to sell 100 million shares to raise the same amount.

Short sellers tend to massacre these sorts of stock, since risk is limited. The lower the price goes, the more the equity gets diluted going forward. And since the company is still far from profitability, there’s little risk of a massive short squeeze; management has to keep selling stock to not run out of cash.

Perhaps there was a plausible path to MoviePass succeeding had Helios and Matheson raised more cash at higher prices. But here we are deep into penny stock territory and the company is still far from the critical mass of subscribers necessary to find a route to profitability. Expect the stock to keep sinking after an initial bounce as all those newly-issued shares find their way to market.

At the time of this writing, the author owned FB stock and had no positions in any of the other aforementioned securities. You can reach him on Twitter at @irbezek.