Will SAI.TECH Global (NASDAQ:SAI) Spend Its Cash Wisely?

Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether SAI.TECH Global (NASDAQ:SAI) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

View our latest analysis for SAI.TECH Global

Does SAI.TECH Global Have A Long 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. When SAI.TECH Global last reported its December 2023 balance sheet in April 2024, it had zero debt and cash worth US$9.9m. In the last year, its cash burn was US$8.2m. So it had a cash runway of approximately 15 months from December 2023. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. Depicted below, you can see how its cash holdings have changed over time.

How Well Is SAI.TECH Global Growing?

At first glance it's a bit worrying to see that SAI.TECH Global actually boosted its cash burn by 20%, year on year. Also concerning, operating revenue was actually down by 36% in that time. Considering both these metrics, we're a little concerned about how the company is developing. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how SAI.TECH Global is building its business over time.

Can SAI.TECH Global Raise More Cash Easily?

SAI.TECH Global revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future 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.

Since it has a market capitalisation of US$21m, SAI.TECH Global's US$8.2m in cash burn equates to about 40% of its market value. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

So, Should We Worry About SAI.TECH Global's Cash Burn?

Even though its falling revenue makes us a little nervous, we are compelled to mention that we thought SAI.TECH Global's cash runway was relatively promising. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. On another note, SAI.TECH Global has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

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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.