Persistent Negative Cash Flows, Staged Financing, and the Stockpiling of Cash Balances

Negative net cash flows have become substantially more pervasive, persistent, and greater in magnitude within US publicly-traded companies since 1971. Companies with negative cash flows, particularly those that also have high intangible capital, account for most of the rise in average cash balances in recent decades. These firms build cash balances through frequent equity offerings; however, the cash holdings are transitory as subsequent negative cash flows lead firms to rapidly burn through the cash. We conclude that funding needs and staged equity financing within negative cash flow firms are central features of the secular rise in average cash balances