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Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
So, the natural question for Fold Holdings (NASDAQ:FLD) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. Let's start with an examination of the business' cash, relative to its cash burn.
View our latest analysis for Fold Holdings
When Might Fold Holdings Run Out Of Money?
You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Fold Holdings last reported its September 2024 balance sheet in December 2024, it had zero debt and cash worth US$4.4m. Importantly, its cash burn was US$4.3m over the trailing twelve months. That means it had a cash runway of around 12 months as of September 2024. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. You can see how its cash balance has changed over time in the image below.
How Well Is Fold Holdings Growing?
One thing for shareholders to keep front in mind is that Fold Holdings increased its cash burn by 270% in the last twelve months. While that's concerning on it's own, the fact that operating revenue was actually down 2.2% over the same period makes us positively tremulous. Considering these two factors together makes us nervous about the direction the company seems to be heading. In reality, this article only makes a short study of the company's growth data. You can take a look at how Fold Holdings has developed its business over time by checking this visualization of its revenue and earnings history.
Can Fold Holdings Raise More Cash Easily?
Since Fold Holdings can't yet boast improving growth metrics, the market will likely be considering how it can raise more cash if need be. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).