Companies Like Gogox Holdings (HKG:2246) Could Be Quite Risky

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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So, the natural question for Gogox Holdings (HKG:2246) 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.

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How Long Is Gogox Holdings' Cash Runway?

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. In June 2025, Gogox Holdings had CN¥152m in cash, and was debt-free. Looking at the last year, the company burnt through CN¥208m. That means it had a cash runway of around 9 months as of June 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Gogox Holdings

How Well Is Gogox Holdings Growing?

Notably, Gogox Holdings actually ramped up its cash burn very hard and fast in the last year, by 134%, signifying heavy investment in the business. While that's concerning on it's own, the fact that operating revenue was actually down 5.8% over the same period makes us positively tremulous. Considering both these metrics, we're a little concerned about how the company is developing. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Gogox Holdings is building its business over time.

Can Gogox Holdings Raise More Cash Easily?

Gogox Holdings revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.

Gogox Holdings' cash burn of CN¥208m is about 110% of its CN¥188m market capitalisation. 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.

How Risky Is Gogox Holdings' Cash Burn Situation?

As you can probably tell by now, we're rather concerned about Gogox Holdings' cash burn. In particular, we think its cash burn relative to its market cap suggests it isn't in a good position to keep funding growth. And although we accept its falling revenue wasn't as worrying as its cash burn relative to its market cap, it was still a real negative; as indeed were all the factors we considered in this article. After considering the data discussed in this article, we don't have a lot of confidence that its cash burn rate is prudent, as it seems like it might need more cash soon. On another note, we conducted an in-depth investigation of the company, and identified 2 warning signs for Gogox Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.