We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Anyone who held Marenica Energy Limited (ASX:MEY) for five years would be nursing their metaphorical wounds since the share price dropped 80% in that time. And it's not just long term holders hurting, because the stock is down 47% in the last year. The falls have accelerated recently, with the share price down 36% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Marenica Energy
With just AU$18,336 worth of revenue in twelve months, we don't think the market considers Marenica Energy 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. It seems likely some shareholders believe that Marenica Energy will discover or develop fossil fuel before too long.
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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Marenica Energy has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in June 2019 Marenica Energy had minimal cash in excess of all liabilities consider its expenditure: just AU$193k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 28% per year, over 5 years . You can click on the image below to see (in greater detail) how Marenica Energy's cash levels have changed over time. You can see in the image below, how Marenica Energy's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.