Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So should Clover Health Investments (NASDAQ:CLOV) shareholders be worried about its cash burn? For the purpose of this article, we’ll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). Let’s start with an examination of the business’ cash, relative to its cash burn.
A company’s cash runway is calculated by dividing its cash hoard by its cash burn. In March 2025, Clover Health Investments had US$160m in cash, and was debt-free. In the last year, its cash burn was US$8.7m. That means it had a cash runway of very many years as of March 2025. Notably, however, analysts think that Clover Health Investments will break even (at a free cash flow level) before then. If that happens, then the length of its cash runway, today, would become a moot point. You can see how its cash balance has changed over time in the image below.
See our latest analysis for Clover Health Investments
Clover Health Investments managed to reduce its cash burn by 96% over the last twelve months, which is extremely promising, when it comes to considering its need for cash. And it could also show revenue growth of 15% in the same period. We think it is growing rather well, upon reflection. 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.
We are certainly impressed with the progress Clover Health Investments has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. 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 looking at a company’s cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year’s cash burn.
