How Much Cash Is Left In The Bank For Moxian Inc (NASDAQ:MOXC)?

In the most recent twelve months, Moxian Inc's (NASDAQ:MOXC) earnings loss has accumulated to -$15.30M. Although some investors expected this, their belief in the path to profitability for Moxian may be wavering. The single most important question to ask when you’re investing in a loss-making company is – will they need to raise cash again, and if so, when? This is because new equity from additional capital raising can thin out the value of current shareholders’ stake in the company. Given that Moxian is spending more money than it earns, it will need to fund its expenses via external sources of capital. Moxian may need to come to market again, but the question is, when? Below, I’ve analysed the most recent financial data to help answer this question. View our latest analysis for Moxian

What is cash burn?

Moxian currently has $0.40M in the bank, with negative cash flows from operations of -$8.38M. Since it is spending more money than it makes, the business is “burning” through its cash to run its day-to-day operations. The measure of how fast Moxian goes through its cash reserves over time is called the cash burn rate. Companies with high cash burn rates can eventually turn into ashes, which makes it the biggest risk an investor in loss-making companies face. Not surprisingly, it is more common to find unprofitable companies in the high-growth tech industry. These companies face the trade-off between running the risk of depleting its cash reserves too fast, or the risk of falling behind competition on innovation and gaining market share by investing too slowly.

When will Moxian need to raise more cash?

Moxian has to pay its employees and other necessities such as rent and admin costs in order to keep its business running. These costs are called operational expenses, which is sometimes shortened to opex. In this calculation I've only included recurring sales, general and admin (SG&A) expenses, and R&D expenses occured within they year. Opex (excluding one-offs) grew by 60.39% over the past year, which is considerably high. This means that, if Moxian continues to grow its opex at this rate, given how much money it currently has in the bank, it will actually need to raise capital again within the next couple of months! Moreover, even if Moxian kept its opex level at $8.8M, it will still have to come to market within the next year. Even though this is analysis is fairly basic, and Moxian still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.

What this means for you:

Are you a shareholder? In the context of your portfolio, you should always seek to diversify, especially if you have a relatively high exposure to Moxian. Hopefully, the analysis has shed some light on the risks you should bear in mind as a shareholder, in particular, its tight cash runway moving forward. Keep in mind that opex is only one side of the coin. I recommend also looking at revenues in order to forecast when the company will become breakeven and start producing profits for shareholders.

Are you a potential investor? The risks involved in investing in loss-making Moxian means you should think twice before diving into the stock. However, this should not prevent you from further researching it as an investment potential. The outcome of my analysis suggests that if the company maintains the rate of opex growth, it will run out of cash within the year. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next.

Good management manages cash well – take a look at who sits on Moxian’s board and the CEO’s back ground and experience here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.