As a practice we don’t delve into the intricacies of corporate finance, a subject better left to accountants or when it comes to some companies in our wacky world people who write fiction. Yet we have reached the point with Tandem (NASDAQ: TNDM), who will report earnings tomorrow after the market closes, where the numbers are all that matters. So, indulge this financially challenged post as we outline how these numbers add up or don’t add up. We will keep things simple as accounting wasn’t our strong suit in college and yes, drinking was.
Per their second quarter results the company had $37.8 million of cash on hand as of June 30th. Per this same report the company burned $15.8 million during the quarter. Fast forward to September 30th per the prospectus for their recent offering the company had $22.5 million in available cash and $10 million in restricted cash.
This same prospectus noted that the ATM netted $4.1 million and they excepted to net $14.8 million from the most recent capital raise. Should all the warrants be exercised they could net another $32.4 million but this seems optimistic at this point.
Ok doing some simple math and assuming a constant burn rate the company should report available cash of approximately $30 to $35 million, which basically means they are like Harry the Hamster on that wheel going nowhere.
Yesterday shares closed at $2.67 down almost 5% giving the company a market cap of just above $27 million. Yet the company owes close to $80 million which again doing some simple math means they have a negative net worth. And as we have been reporting the debt holders are getting very nervous considering a wide range of options including taking over the company. Unlike Johnson and Johnson (NYSE: JNJ) these debt holders would rather get something than nothing.
Here is the bigger problem the company does not need a small cash infusion to be viable over the long term, they need a boatload of cash. Sure, these recent financial maneuvers have bought some time but that’s it. Think of it this way, Tandem is like a patient in the ICU facing multiple issues. For the moment the doctors have stabilized the patient but have yet to figure out if the patient can be saved given the extent of these issues. At some point the doctors will turn to the patient’s family asking how long they should keep the patient alive.
In this case the family is Tandem’s debt holders who just might pull the plug while there is still cash on hand. They are in control which means shareholders are about to get screwed.
Now we know there some who believe in miracles and there are others who simply ignore the facts. But in this case the numbers don’t lie and tell the real story. Tandem is in very serious financial trouble and whiz bang way cool won’t fix that. Our one hope is that Tandem management won’t leave their patients out in the cold. That they will not simply close shop, divvy up what’s left of the cash and give patients no warning.
Listen people may not be thrilled that JNJ sent patients to Medtronic (NYSE: MDT) but it’s better than giving them no option at all.
This is the harsh reality and the sooner people start realizing this the better. This isn’t personal, this is business. As Momma Kliff used to say; “Facts are like a hammer when they hit they hit hard.”