We can readily understand why investors are attracted to unprofitable companies. 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 Meridian Mining UK Societas (TSE:MNO) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.

See our latest analysis for Meridian Mining UK Societas

How Long Is Meridian Mining UK Societas' Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Meridian Mining UK Societas last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth US$15m. Importantly, its cash burn was US$13m over the trailing twelve months. So it had a cash runway of approximately 14 months from June 2024. The image below shows how its cash balance has been changing over the last few years.

How Is Meridian Mining UK Societas' Cash Burn Changing Over Time?

Because Meridian Mining UK Societas isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. With the cash burn rate up 29% in the last year, it seems that the company is ratcheting up investment in the business over time. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Easily Can Meridian Mining UK Societas Raise Cash?

Given its cash burn trajectory, Meridian Mining UK Societas shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).