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Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame Selecta Biosciences, Inc. (NASDAQ:SELB) shareholders if they were still in shock after the stock dropped like a lead balloon, down 84% in just one year. That'd be enough to make even the strongest stomachs churn. We wouldn't rush to judgement on Selecta Biosciences because we don't have a long term history to look at. And the share price decline continued over the last week, dropping some 6.7%.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
See our latest analysis for Selecta Biosciences
We don't think Selecta Biosciences's revenue of US$913,000 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Selecta Biosciences comes up with a great new treatment, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Selecta Biosciences investors might realise.
When it reported in March 2019 Selecta Biosciences had minimal cash in excess of all liabilities consider its expenditure: just US$754k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 84% in the last year. The image below shows how Selecta Biosciences's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.