Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Sprint Nextel Corporation (S), Cell Therapeutics Inc (CTIC): 5 Companies That Haven’t Earned Their Keep

Page 1 of 2

In order to become a successful investor, it takes a love for finance, quite a bit of discipline, and a long-term mind-set. Another important factor that most investors often overlook is a penchant for cutting your losses early before you let a bad investment spiral out of control.

Today, I take a look at five companies that have taken investors for a roller-coaster ride filled with mounting losses. By focusing on these five companies’ accumulated deficit — which is the amount of net loss that is attained in a given quarter or year (be it through losses or writedowns) and added cumulatively to previous years’ net earnings or losses — you’ll be able to get a better idea of why I feel they have no chance of ever earning their keep with shareholders.

Sprint Nextel Corporation (NYSE:S)

Sprint Nextel Corporation (NYSE:S)

It’s a good thing that SoftBank agreed to become a majority stakeholder in Sprint Nextel Corporation (NYSE:S), because the way the company was racking up losses was putting it on a course for irrelevance or perhaps even something worse.

As of the first quarter, Sprint Nextel Corporation (NYSE:S) had an accumulated deficit of an astonishing $45.5 billion. This service provider has fallen way behind its peers Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) in terms of rolling out a next-generation 4G LTE network. Even more disturbing, it sold more than 5 million smartphones during the quarter, delivered its highest wireless service revenue, and also its highest average revenue per user in its history, and still lost money! As I see it, Sprint Nextel Corporation (NYSE:S)’s days of being relevant are long gone.

Cell Therapeutics Inc (NASDAQ:CTIC)

Certainly no discussion of companies with large accumulated deficits would be complete without discussing a biotechnology company. It’s perfectly understandable to see a biotech, especially a clinical-stage one, run with an accumulated deficit, as it takes time and money to build up a drug pipeline. However, after multiple complete response letters (the equivalent of a rejection) by the Food and Drug Administration and years without an approved drug, Cell Therapeutics Inc (NASDAQ:CTIC) racked up an astounding $1.83 billion in accumulated deficits through the end of fiscal 2012. By comparison, that’s nearly 56 times larger than its shareholder equity.

I have personally lost track of how many times this company has diluted shareholders with a secondary offering to stay afloat, but with the share price currently at $1.22 now and a reverse-split-adjusted $14,510 a share one decade ago, that should give you some idea of the danger of buying companies that let their losses grow unabated. Cell Therapeutics Inc (NASDAQ:CTIC) does, finally, have an approved drug in the EU known as Pixuvri to treat multiple relapsed or refractory aggressive non-Hodgkin B-cell lymphoma, but that’ll hardly make a dent and, in my opinion, certainly won’t get the company to profitability by itself.

Clearwire Corporation (NASDAQ:CLWR)

Trust me, there is no irony lost on me in the fact that Sprint Nextel Corporation (NYSE:S), which boasts an accumulated deficit that’s twice as high as its market value, is currently in a bidding war with DISH Network Corp. (NASDAQ:DISH) to purchase 4G wireless broadband specialist Clearwire Corporation (NASDAQ:CLWR), which has itself amassed an accumulated deficit of $2.57 billion as of the first quarter.

The big allure of Clearwire Corporation (NASDAQ:CLWR) is its vast spectrum assets. Beyond these assets, I’m not sure there would be a viable reason that Clearwire is still in business. Between 2005 and 2012, Clearwire burned through $10.6 billion in free cash outflow, mostly to expand its now-archaic WiMax network. Even its WiMax partner, Sprint, which has kept Clearwire Corporation (NASDAQ:CLWR) afloat on more than one occasion, didn’t seek out Clearwire for its 4G LTE buildout. Instead, Sprint opted initially for LightSquared and only succumbed to Clearwire Corporation (NASDAQ:CLWR)’s charm after the Federal Communications Commission struck down the use of LightSquared’s satellite network because of potential GPS interference. This is nothing more than a merger out of weakness for Clearwire.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!