Top 10 most indebted Nasdaq companies: Who’s feeling the pinch as borrowing cost rises start to bite?
The start of a global monetary tightening cycle has brought an end to an era of ultra-low interest rates in the US, which could spell trouble for companies with high levels of debt.
The US Federal Reserve (Fed) has hiked interest rates by more than 2% in six months since March 2022 – the fastest pace of rate hikes in over three decades.
Higher-than-expected September inflation data released on 13 October signalled more rate hikes to come in the near-term, with analysts not ruling out a chance of a massive 100 basis point rate hike in November.
Which companies are most likely to feel the pinch as borrowing costs rise? For this article we’ve listed the Nasdaq-listed companies with the highest debt compared to equity.
How to identify the most indebted companies?
Investors can use the debt-to-equity ratio to find what companies carry the most debt. The financial ratio is measured by dividing the total debt of a company by its total assets. A ratio of more than one indicates that the company has more debt than assets.
Meanwhile, leverage ratios give traders an overall view of a company’s financial health. Quick ratio and current ratio measure a company’s ability to finance its near-term debt.
The difference between the two is that the former is more conservative than the latter, as quick ratio considers only highly-liquid assets that can be converted into cash within 90 days or less. Current ratio takes into account assets that can be converted into cash within one year.
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What are the most indebted companies on Nasdaq?
The list of most indebted companies below is based on the companies with the highest total debt-to-equity ratio as shown on investing.com’s stock screener, as of 14 October.
These Nasdaq companies in debt have a negative debt-to-equity ratio, meaning that a firm has more liabilities than assets, which could indicate the risk of bankruptcy.
Revance
Commercial stage aesthetics-focused biotechnology company Revance (RVNC) was top of the list of Nasdaq-listed indebted companies based on debt-to-equity ratio, as shown on investing.com’s stock screener on 14 October.
The total debt-to-equity ratio stood at -16,640, according to investing.com. The quick ratio stood at 3.1 and the current ratio at 3.4 on 14 October.
Revance completed the Phase 3 program for its flagship product, DaxibotulinumtoxinA for Injection, for the treatment of moderate to severe frown lines.
Revance reported total revenue of $53.6m and a net loss of $125.7m for six months ended 30 June 2022. Total non-current debt of the company stood at about $378.4m on 30 June 2022, up from $280.6m reported six months ago.
Tabula Rasa HealthCare
Tabula Rasa HealthCare (TRHC) is a provider of medication safety solutions. The company aims to help pharmacists and prescribers via its medication risk mitigation and clinical support software and services.
Total debt-to-equity ratio stood at -5900, according to investing.com. Quick ratio stood at 0.54 and current ratio came in at 1.7 on 14 October.
The healthcare firm derives majority of its revenue from its CareVention HealthCare segment, which provides solutions for Programs of All-Inclusive Care for the Elderly (PACE).
The company reported total long-term debt of over $319.9m, as of 30 June 2022. June quarter total revenue came in at about $72.6m and quarterly net loss at about $49.6m.
Clene
Clene (CLNN) is a clinical-stage biopharmaceutical company specialising in the treatment of neurodegenerative diseases. The firm also has multiple drugs in development for applications in infectious disease and oncology. The biopharma is focused on developing treatments for amyotrophic lateral sclerosis, multiple sclerosis and Parkinson’s Disease.
Its total debt-to-equity ratio stood at -4750, according to investing.com. Quick ratio stood at 3.4 and current ratio came in at 4.1 on 14 October 2022.
Clene reported a loss from operations of $13.6m for the June 2022 quarter. Cash, cash equivalents and marketable securities stood at $26.3m on 30 June 2022.
Goosehead Insurance
Goosehead Insurance (GSHD) is a personal lines insurance company. Goosehead Insurance has more than 150 companies that underwrite personal lines and small commercial lines risks.
The insurer’s total debt-to-equity ratio stood at -4630, according to investing.com. Quick ratio stood at 1.58 and current ratio came in at 1.95 on 14 October 2022.
The company reported total revenues of $94.3 m and net loss of nearly $3m for the first six months of 2022. Goosehead Insurance said its total outstanding term note payable balance stood at $96.9 m on 30 June 2022.
Reed’s
Reed’s (REED) is a beverage company that owns a portfolio of handcrafted and natural ginger beverages. Total debt-to-equity ratio of the company stood at -4250, according to investing.com. Quick ratio stood at 0.29 and current ratio came in at 1.25 on 14 October.
In 2021, Reed’s was notified of the risk of delisting from the Nasdaq stock exchange as its common stock no longer met the exchange’s minimum $1 bid price per share requirement. On 3 October 2022, the company was granted an extension until February 2023 to meet listing requirements.
The company said in its June 2022 quarter earnings report that it had a cash balance of $280 with $969 of current availability and $1,361 of additional borrowing capacity on 30 June 2022.
Avadel Pharmaceuticals
Avadel Pharmaceuticals (AVDL) is a biopharmaceutical company focused on the treatment of narcolepsy. Narcolepsy is a rare, chronic sleep disorder characterised by excessive daytime sleepiness, disrupted nighttime sleep, sleep paralysis and hallucinations.
Total debt-to-equity ratio of the firm stood at -4090, according to investing.com. Quick ratio was 2.25 and current ratio came in at 2.72 on 14 October.
The pharma firm’s current lead drug candidate is FT218 which is designed to be a once-at-bedtime narcolepsy medicine. In July 2022, FT218 received tentative approval from the US FDA with potential final approval expected in June 2023, according to Avadel.
Avadel reported a net loss of $63.4m for the June 2022 quarter, up from $19.6m a year ago. Its stock has fallen over 27% YTD, as of 13 October’s close. The company had $26.4m of convertible debt that matures in February 2023 and $117.4m that matures in October 2023.
Inhibrx
Inhibrx (INBX) is a clinical-stage biotechnology company focused on developing cancer and orphan disease-related drugs.The firm has four drug candidates that are ongoing clinical trials of which three are for the treatment of various cancers and one for Alpha-1 Antitrypsin Deficiency.
Total debt-to-equity ratio of the biotech firm was -3570, according to investing.com. Quick ratio was 7.30 and current ratio stood at 7.50 on 14 October.
For the June 2022 quarter, the company reported a net loss of $37.7m compared to $20.7m a year ago.The indebted company said long-term debt increased to $169.8m, as reported on 30 June 2022, from about $70.5m reported a year ago.
Melco Resorts & Entertainment
Melco Resorts & Entertainment (MLCO) operates and develops integrated resort facilities in Asia and Europe. The company’s single largest shareholder Melco International Development is listed in Hong Kong.
The firm’s total debt-to-equity ratio was -3110, according to investing.com. Quick ratio stood at 1.95 and current ratio came in at 2.36 on 14 October.
Melco Resorts & Entertainment has a significant presence of resorts and casinos in Macau with operations in the Philippines and Cyprus as well. In 2022, the company’s stock was hurt by strict zero-Covid restrictions in China.
Total operating revenues of the company fell 48% year-on-year to $296.1m in the second quarter of 2022. The company reported a quarterly net loss attributable of $251.5m, compared to $185.7m a year ago. On 30 June 2022, the company’s total cash and bank balances stood at $1.65bn and total debt was $7.3 bn.
Phathom Pharmaceuticals
Phathom Pharmaceuticals (PHAT) is a biopharmaceutical company focused on developing treatments for gastrointestinal disorders. According to the firm’s website, it has licensed the exclusive rights for an investigational potassium-competitive acid blocker in the US, Europe and Canada.
The company has completed Phase 3 clinical trials for the treatment of H. pylori infection and erosive GERD, and is currently running a Phase 3 trial studying daily dosing therapy for patients with non-erosive reflux disease.
Phathom Pharmaceuticals’ long-term debt stood at $92.4m on 30 June 2022, up from $89.6m reported six months ago. Total debt-to-equity ratio was at -2750, according to investing.com. Quick ratio stood at 9.84 and current ratio came in at 9.93 on 14 October.
TELA Bio
TELA Bio (TELA) is a commercial-stage medical technology firm. The company provides soft-tissue preservation and restoration products for hernia repair, abdominal wall reconstruction and plastic and reconstructive surgery.
In its latest quarterly earnings report, the company said revenue grew 38% year-on-year to $10.4m in the second quarter of 2022. Quarterly net loss widened to $12.7m from $8.3m a year ago.
The indebted company said long-term debt stood at $39.6m on 30 June 2022 compared to nil reported six months ago.
Total debt-to-equity ratio of the company stood at -2680, according to investing.com. Quick ratio stood at 2.77 and current ratio came in at 3.83 on 14 October.
Bottom line
A majority of the most indebted Nasdaq companies appear to be from the biotechnology sector. The capital-intensive and time-consuming nature of research and development operations in the field of medicine gives some biotech companies little choice but to fuel their working capital with debt.
Readers should note that the debt-to-ratio figures stated above are based on past data. These indebted Nasdaq companies may force a comeback if conditions become favourable. A discovery of a new drug or a FDA approval for a medicine after years of development can change the fortunes of clinical-stage biotech stocks.
It’s important to note that the list above shouldn’t be used as a one-stop guide. Always conduct your own research looking at the latest technical and fundamental analysis, and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size, and goals. Never trade money that you cannot afford to lose.
FAQs
What is the debt to equity ratio?
Debt-to-equity ratio is a financial ratio that is measured by dividing the total debt of a company by its total assets.
Where to find debt-to-equity ratio?
You can calculate debt-to-equity ratio by dividing the total debt of a company by its total assets, which you can find in the firm’s financial reports. You can also find debt-to-equity ratio on stock screener websites.
What is the most indebted company on Nasdaq stock exchange?
Commercial stage aesthetics-focused biotechnology company Revance (RVNC) was top of the list of Nasdaq-listed indebted companies based on debt-to-equity ratio as shown on investing.com’s stock screener on 14 October. Total debt-to-equity ratio of the company stood at -16,640, according to investing.com. Quick ratio stood at 3.1 and current ratio came in at 3.4 on 14 October.
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