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It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame American Helium Inc. (CVE:AHE) shareholders if they were still in shock after the stock dropped like a lead balloon, down 92% in just one year. That'd be enough to make even the strongest stomachs churn. We wouldn't rush to judgement on American Helium because we don't have a long term history to look at. Furthermore, it's down 29% in about a quarter. That's not much fun for holders.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for American Helium
American Helium didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that American Helium will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some American Helium investors have already had a taste of the bitterness stocks like this can leave in the mouth.
American Helium had liabilities exceeding cash by CA$473 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 92% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how American Helium's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.