In an 8-K filing with the Securities and Exchange Commission, Tintri noted it “likely did not have sufficient liquidity to continue its operations beyond June 30, 2018.” The company had just $11.5 million in cash at the end of May, having burned through more than $19 million that month alone.
The Mountain View, California-based firm also said that it was in breach of certain covenants tied to its credit facilities that could be called by those lenders and force Tintri’s financial position. Those lenders include Silicon Valley Bank and TriplePoint Capital.
“The company continues to evaluate its strategic options, including a sale of the company,” Tintri noted in its filing. “Even if the company is able to secure a strategic transaction, there is a significant possibility that the company may file for bankruptcy protection, which could result in a complete loss of shareholders’ investment.”
Tintri’s stock has lost two-thirds of its value since the 8-K filing late last Friday. It was trading down more than 25 percent this morning at around $0.18 per share.
“We see a bankruptcy filing as the most likely outcome, which would negate the value of shareholder equity,” Raymond James & Associates wrote in a research note.
Rivals Dominate the Market
Tintri, which provides flash-based and hybrid-flash array storage targeted at enterprise cloud deployments, competes against larger rivals in the space like NetApp, Dell EMC, Hewlett Packard Enterprise (HPE), Hitachi, and IBM. In fact, a recent IDC report on the enterprise storage market had those five firms controlling more than 75 percent of segment revenues for the first quarter of this year.
The IDC report noted that worldwide enterprise storage systems factory revenue grew 34.4 percent year over year during the first quarter of 2018 to $13 billion. Eric Sheppard, research vice president for server and storage infrastructure at IDC, linked the growth to demand for public cloud resources and a global enterprise infrastructure refresh.
But Tintri has not benefited from that growth. The vendor late last week released preliminary first quarter results for its fiscal 2019 that ended April 30, that showed $22 million in revenues and an expected loss of $1.14 per share. The company also postponed the full release of those results due to losing employees tied to preparing the results.
Tintri launched its IPO at the end of June 2017, raising an estimated $50.3 million on opening day. However, the amount was below initial expectations as the company slashed its initial planned share price from between $10.50 to $12.50 per share, to between $7 and $8 per share due to lagging demand.
“Clearly, there was a disconnect between how much customers love Tintri and how much investors love Tintri, but I’m confident that gap will close,” Tintri CEO Ken Klein told TheStreet at that time.
The company’s stock eventually opened at $7.12 per share before topping out at $7.75 per share that day. It has since spiraled downward to its current position supporting a market capitalization of just over $6 million.
That IPO funding came on top of more than $262 million in private funding it had scored since its formation in 2008. Those investors included New Enterprise Associates, Menlo Ventures, Lightspeed Venture Partners, Insight Venture Partners, and Silver Lake Kraftwerk.
Some analysts pointed to warning signs tied to Tintri’s IPO filing. Those signs included financial results that showed the company’s revenues surged from $50 million in 2015, to more than $125 million for fiscal 2017. However, net losses also grew from $70 million to $105.3 million over the same time period.
Venturedeal, which was not financially connected with Tintri’s IPO, expressed “concern” with the company’s slowing revenue growth and “high cash burn.”
“The company is growing revenues at a rate that is typical of successful enterprise IT software firms at this stage,” wrote Donovan Jones from Venturedeal.com via SeekingAlpha. “However, the story is also typical in that growth rates are decelerating as the company exceeds $100 million in annual revenues. … Additionally, [Tintri] is burning through large amounts of cash to achieve those diminishing growth rates, indicating a less-than-efficient sales model as the company scales.”