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Trading Below Cash

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Definition of 'Trading Below Cash'

When a company's total share value is less than its cash minus debts. Trading below cash occurs when the market capitalization is less than the amount of actual cash a company has on hand. Trading below cash often occurs when growth prospects are poor.
Investopedia Says

Investopedia explains 'Trading Below Cash'

Trading below cash may or may not be viewed as a negative depending on the company outlook. If a company is in the process of a turnaround, the stock may be trading below cash with the potential to succeed in the future. The opposite may also be true, if a company is trading at below cash with weak growth prospects, it may be a sign the company is in trouble.

There's an old saying, "even a palace isn't worth much if it's on fire," meaning that a company's cash reserves aren't nearly as important as how fast the money is being spent (the burn rate).

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