Imagine Owning Birimian (ASX:BGS) And Trying To Stomach The 71% Share Price Drop
Simply Wall St
Simply Wall St.May 31, 2019
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Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame
Birimian Limited (
ASX:BGS) shareholders if they were still in shock after the stock dropped like a lead balloon, down 71% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. To make matters worse, the returns over three years have also been really disappointing (the share price is 48% lower than three years ago). Furthermore, it's down 21% in about a quarter. That's not much fun for holders.
See our latest analysis for BirimianWith zero revenue generated over twelve months, we don't think that Birimian has proved its business plan yet. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, investors may be hoping that Birimian finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Birimian has already given some investors a taste of the bitter losses that high risk investing can cause.
Birimian had cash in excess of all liabilities of just AU$2.7m when it last reported (December 2018). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 71% in the last year. The image below shows how Birimian's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
ASX:BGS Historical Debt, May 31st 2019
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In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It only takes a moment for you to
check whether we have identified any insider sales recently.What about the Total Shareholder Return (TSR)?Investors should note that there's a difference between Birimian's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Birimian's TSR, at -71% is higher than its share price return of -71%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
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