There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

Given this risk, we thought we'd take a look at whether Movano (NASDAQ:MOVE) shareholders should be worried about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is Movano's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at June 2024, Movano had cash of US$17m and no debt. Importantly, its cash burn was US$25m over the trailing twelve months. That means it had a cash runway of around 8 months as of June 2024. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. Depicted below, you can see how its cash holdings have changed over time.

How Is Movano's Cash Burn Changing Over Time?

Whilst it's great to see that Movano has already begun generating revenue from operations, last year it only produced US$852k, so we don't think it is generating significant revenue, at this point. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. As it happens, the company's cash burn reduced by 8.4% over the last year, which suggests that management may be mindful of the risks of their depleting cash reserves. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can Movano Raise More Cash Easily?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Movano to raise more cash in the future. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).