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As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of Clean Motion AB (STO:CLEMO) investors who have held the stock for three years as it declined a whopping 76%. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 57% in the last year. The falls have accelerated recently, with the share price down 43% in the last three months.
View our latest analysis for Clean Motion
With just kr4,912,000 worth of revenue in twelve months, we don't think the market considers Clean Motion to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Clean Motion can make progress and gain better traction for the business, before it runs low on cash.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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. Clean Motion has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Clean Motion had kr35,872,000 more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. But with the share price diving 38% per year, over 3 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Clean Motion's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. It costs nothing but a moment of your time to see if we are picking up on any insider selling.