The stock of Tilray (NASDAQ:TLRY) has lost over 80% of its value despite significant growth in sales and the top-line increasing by almost four times to $167 million. This decline could be attributed to the cash depletion in the company and the investors’ fear of companies filing for bankruptcy.
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The company had reported a cash and cash equivalents balance of $96.8 million as on December 31, down by the previous year’s figure of $487.3 million. The company seems to be on the same pattern of burning too much cash, which might ultimately put Tilray in a desperate position to issue shares so as to raise money, thereby leading to share dilution.
Moreover, the cash depletion was a result of the company’s operating activities, which used up $258 million cash, while $253 million was used for the investing activities. The company had to, consequently, raise $111 million through issuing common stock. In the last quarter of 2019 alone, the company had used $91 million for its operations.
In order to cut down on its costs and gradually achieve profits, on February 4, 2020, the company came forward with the announcement of letting go of 10% of the workforce. But, with subsequent losses over the past ten quarters and a loss of $220 million (in the most recent quarter), profitability seems impossible. Moreover, with the COVID-19 pandemic hitting the markets, countries are bound to face recession.
This would make it difficult for Tilray to generate growth in sales in the coming quarters. The company would also need to raise further cash through the equity market, positioning the stock to face further losses in fiscal 2020. Tilray stock is down by 60% year-to-date. For the company to impress investors, it would first need to generate positive cash flow from its operations.