What is a Net-Net? This is a company whose net cash (Cash-Debt=Net Cash) on the balance sheet > market cap. There are two kinds of net-nets.
1) High cash burn: You will find many micro-cap biotechs in this category. In fact, according to some research I have seen, there have never been as many net cash biotechs as there are right now. However, one must be cautious because a $150mm mkt cap biotech with $200mm cash can still fail since many of them are burning $50-70mm dollars a year on R&D and overhead costs. If the products are still in Phase 1 or early Phase 2, the company could run out of cash or be forced to sell stock at highly dilutive terms. A perfect example of this is $ALNA. However, you can find some like $PASG where commercialization is closer and the cash pile is large.
2) Beaten up and forgotten: These tend to be companies that might have gone public in the last few years and rapidly fell out of favor or were forgotten. This is the most promising type to look for as they usually have revenues, if not profits, which dramatically increases survival risk. $XL is a great example of this type. The company retrofits commercial fleets for EV/hybrid conversions. The company raised a pile of cash at the IPO in 2019 which should last for at least 3 years. There were many of these types after the 2000 tech bubble and many of them ended up being acquired for nice premiums eventually, but you had to be patient.
I invite you to share any Net-Nets you find and I will take a look and give my quick take on them.
Happy hunting!
I am long $PASG (6 months) and $XL (yesterday).
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