U.S. Markets closed
  • S&P 500

    4,185.47
    +15.05 (+0.36%)
     
  • Dow 30

    34,200.67
    +164.68 (+0.48%)
     
  • Nasdaq

    14,052.34
    +13.58 (+0.10%)
     
  • Russell 2000

    2,262.67
    +5.60 (+0.25%)
     
  • Crude Oil

    63.07
    -0.39 (-0.61%)
     
  • Gold

    1,777.30
    +10.50 (+0.59%)
     
  • Silver

    26.04
    +0.08 (+0.29%)
     
  • EUR/USD

    1.1980
    +0.0004 (+0.0359%)
     
  • 10-Yr Bond

    1.5730
    +0.0430 (+2.81%)
     
  • Vix

    16.25
    -0.32 (-1.93%)
     
  • GBP/USD

    1.3842
    +0.0058 (+0.4180%)
     
  • USD/JPY

    108.7500
    +0.0340 (+0.0313%)
     
  • BTC-USD

    61,848.34
    -1,359.94 (-2.15%)
     
  • CMC Crypto 200

    1,398.97
    +7.26 (+0.52%)
     
  • FTSE 100

    7,019.53
    +36.03 (+0.52%)
     
  • Nikkei 225

    29,683.37
    +40.68 (+0.14%)
     

Those Who Purchased N4 Pharma (LON:N4P) Shares A Year Ago Have A 71% Loss To Show For It

  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
  • Oops!
    Something went wrong.
    Please try again later.

Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. It must have been painful to be a N4 Pharma Plc (LON:N4P) shareholder over the last year, since the stock price plummeted 71% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on N4 Pharma because we don't have a long term history to look at. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.

View our latest analysis for N4 Pharma

We don't think N4 Pharma's revenue of UK£23,524 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that N4 Pharma can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). N4 Pharma has already given some investors a taste of the bitter losses that high risk investing can cause.

N4 Pharma had cash in excess of all liabilities of just UK£1.1m when it last reported (June 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 71% in the last year . The image below shows how N4 Pharma's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how N4 Pharma's cash levels have changed over time.

AIM:N4P Historical Debt, December 23rd 2019
AIM:N4P Historical Debt, December 23rd 2019

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

While N4 Pharma shareholders are down 71% for the year, the market itself is up 21%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 23%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before spending more time on N4 Pharma it might be wise to click here to see if insiders have been buying or selling shares.

Of course N4 Pharma may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.