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We can readily understand why investors are attracted to unprofitable companies. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
So should Bolt Biotherapeutics (NASDAQ:BOLT) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
View our latest analysis for Bolt Biotherapeutics
Does Bolt Biotherapeutics Have A Long Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In June 2024, Bolt Biotherapeutics had US$74m in cash, and was debt-free. Importantly, its cash burn was US$64m over the trailing twelve months. So it had a cash runway of approximately 14 months from June 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 Bolt Biotherapeutics Growing?
On balance, we think it's mildly positive that Bolt Biotherapeutics trimmed its cash burn by 9.6% over the last twelve months. Having said that, the revenue growth of 65% was considerably more inspiring. It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.
How Hard Would It Be For Bolt Biotherapeutics To Raise More Cash For Growth?
Even though it seems like Bolt Biotherapeutics is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
Bolt Biotherapeutics has a market capitalisation of US$25m and burnt through US$64m last year, which is 257% of the company's market value. Given just how high that expenditure is, relative to the company's market value, we think there's an elevated risk of funding distress, and we would be very nervous about holding the stock.