Stocks with High Cash Burn


The reason why stocks gap up on news or hype is that the company is desperate for cash. The company will sell shares to people to raise cash in an event called an offering. There is a very thin line between what ethical financing is and what isn't. But when a company is on the verge of bankruptcy, all that matters is immediate cash.

If you consider all the information from the fundamentals, you will end up with conflicting information that makes decision making harder. However, if you focus on a niche and look straight for the 10% that matters, it will only take a couple of minutes to make up your mind. You’ll be surprised that 90% of fundamental analysis is noise and is strategy dependent.

The goal is not just to see how good or bad a stock is but to find the answer to this question: will they dilute?

The most important metric to look for is:

· Cash burn

Cash Burn

Cash burn is a good indication of how much money they are left. Check how much [cash equivalent] they have and divide that by [Operational expenses]. That is the amount of time they have before they run out of money. Most biotech companies don’t have any revenue until the completion of phase 3. Therefore, dilution is an option to raise cash.

The company will fill out an S1 form, stating they are offering some shares. Everyone forgets about it. After some months, they pump it up, then dilute. They need to also file an EFFECT. But this is usually filled on the day of the dump. Each time the stock receives good news, e.g good phase 3 results for a biotech stock. They will start diluting, and there will be a huge amount of selling that day that causes the stock to fade all day.

Then they will have to file the 424b5 form to state how much stock they sold. This is filled after the event has happened.

The Fundamental EDGE

If you can go long before a gap up, your returns will be close to 100%. It is a swing trading strategy. In the example below, we can see that $INDP only had 19 days left before it ran out of cash. An S3 was filled and a few candles later, a massive gap up followed by and EFFECT and 424 form.

Want more charts like this: Check it out here!


No one has the time to go through 10000 fillings and find these patterns. Therefore, we have an automated system that searches for these stocks daily/weekly. A list of tickers that will run out of cash in and will need to raise in before the next quarter can be found following the link below.


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