BitNile Holdings (NYSEAMERICAN:NILE), a diversified holding company that specializes in cryptocurrencies and decentralized finance (DeFi) has recently announced its 2021 full-year financial results. So, should you consider NILE stock a “Buy now” after these results? In a word, no. There are four strong reasons why NILE stock has seen losses of nearly 60% year-to-date closing at $0.4840 on Apr. 25.
All the arguments presented below are based upon pure fundamentals. Even revenue growth of 120% to $52.4 million in 2021 from $23.9 million in 2020 is not enough to get excited and invest in NILE stock.
To start, the company is unprofitable and has been since 2017. In its latest 10-K form for 2021, BitNile Holdings reported an increase of approximately 253% to its total operating expenses to $46.9 million in 2021 versus $13.5 million in 2020, a wider loss from continuing operations to $18.3 million compared to a loss of $6.03 million in 2020. Although the company narrowed net loss to $24.2 million compared to a net loss of $32.7 million in 2020, this was because there was a huge stock dilution.
Any stock dilution is negative news for the intrinsic value of a stock. The higher the stock dilution the worse the situation for investors. I have mentioned several times that a stock dilution is a way for companies to reduce their net losses as it is all about a math calculation. Higher amount of shares results in a lower net loss. BitNile Holdings in 2020 reported a weighted average common share outstanding, basic, and diluted of 9,606,000.
In 2021, to fund its growth and business plans, the company raised cash via stock offering resulting in reporting a weighted average common share outstanding, basic, and diluted in 2021 of 55,444,000. That is a 477% increase in average common shares outstanding. That’s a huge stock dilution!
Finally, BitNile Holdings is burning cash and in 2021 reported a free cash flow of -$183.35 million compared to a figure of -$11.93 million in 2020, which poses a severe liquidity risk given the fact that on its balance sheet at the end of 2021 the firm reported cash and short term investments of $63.78 million.
A huge stock dilution, continuing net losses, inability to make a profit from core business operations reporting a positive earnings before interest and taxes (EBIT) figure, and a cash burn problem are solid reasons to avoid NILE stock now.
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On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.