Easy Come, Easy Go: How Phivida Holdings (CNSX:VIDA) Shareholders Got Unlucky And Saw 81% Of Their Cash Evaporate
The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So spare a thought for the long term shareholders of Phivida Holdings Inc. (CNSX:VIDA); the share price is down a whopping 81% in the last twelve months. That'd be a striking reminder about the importance of diversification. Phivida Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Phivida Holdings
Phivida Holdings recorded just CA$123,643 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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). Investors will be hoping that Phivida Holdings can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Phivida Holdings investors might realise.
When it last reported its balance sheet in June 2019, Phivida Holdings had cash in excess of all liabilities of CA$8.0m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 81% in the last year, it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Phivida Holdings's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Phivida Holdings's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
While Phivida Holdings shareholders are down 81% for the year, the market itself is up 3.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 40%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Phivida Holdings by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
