I’ll pass on MoviePass.

Not the service necessarily but the stock for sure. In case you haven’t heard about it. MoviePass is a subscriber service for movie viewing. No, not Netflix (NSDQ: NFLX), even my grandmother has Netflix.

A MoviePass customer pays $9.95 per month. This fee allows the subscriber to see one movie per day at any theater.

In an age when the death of actual movie theaters is bandied about almost as often as the death of the brick and mortar stores, this is a revolutionary idea. Retro, if you will.

And it’s taking on huge masses of people. MoviePass lowered its monthly fee from $30 per month to $9.95 last August. The company reported an immediate surge in new subscribers. Since the August price cut, MoviePass’ subscriber base grew fivefold to over 1 million subscribers.

The problem for MoviePass is that it doesn’t have any supply agreements from movie theaters. Unlike a service like Groupon (NSDQ: GRPN) which gets a discount from suppliers and then resells those to consumers, MoviePass is funding the cheap movie tickets itself.

The average price for a movie ticket nationwide is currently $8.93. However, in many major metros prices are as high as twenty dollars. For example, a ticket to see Jumanji tonight at Boston’s Lowe’s theater costs $15.69.

MoviePass pays that ticket price to the theater. In return, it receives almost ten dollars a month from me. The service is cancellable at any time, but a subscribe must wait two weeks after first signing up to attend its first movie (you must wait for your membership card to arrive in the mail).

In effect, MoviePass loses money on any subscriber who goes to more than one movie per month. This math assumes that the subscriber base is spread evenly throughout the country. I suspect that there is a higher concentration of subs living in high ticket price cities. It’s much easier to justify the monthly fee when that cost is covered by just one trip to the movies.

Often with a new service, a company loses money on the first groups of customers but then reaches a tipping point where the sum of all subscriber fees pays for the service.

Unfortunately, MoviePass is the inverse of that model. It loses more money as it grows. Unlike a gym that has significant overhead and begins making money when it signs up more members, MoviePass enjoys no benefit of scale.

Short sellers have taken notice and sold short more than two-thirds the available shares of MoviePass’ parent company. MoviePass is not a publicly traded stock, but its largest owner is.

Helios & Matheson Analytics (NSDQ: HMNY) purchased a majority stake in MoviePass last summer and is the only way to play the trajectory of MoviePass’ fortunes. Helios & Matheson’s stock rocketed up from $2.55 before the MoviePass deal to more than $32 mid-October.

The company was losing money before the MoviePass deal and will lose even more with MoviePass in its company.

Despite Helios’ stock dropping to $8.00 short sellers aren’t giving up. Short interest, the number of shares sold short, is climbing steadily despite the magnificent drop in the stock price. In fact, the number of shares short is now almost five million versus less than two million in October.

Based on MoviePass’ business model and Helios & Matheson’s fundamentals I think the stock could go lower. But like a popular movie that is sold out when you get to the ticket counter, Helios’ stock is currently locked out to any new shorts.

This lockout is due to the logistical issues in shorting stocks. Before a stock can be sold short, an investor must borrow those shares from his broker. My broker laughed when I asked how many shares were available to borrow- NONE.

Such is one of the difficulties in shorting stocks. I’ve spent a good portion of my career researching shorts. This circumstance surrounding Helios & Matheson is common. A good deal of research doesn’t always result in an executable trade at that moment.

But bears are patient animals. While I can’t be short Helios right now, I have no doubt my research on the industry and the company will be put to use in the future.