Rafael Holdings, Inc. — financial distress indicators
Financial-health summary
Rafael Holdings, Inc.'s reported numbers place it in the 'Weak' financial-health band (distress score 51/100). The main indicators are losses in each of the last 3 years, operations consume cash and ohlson o-score signals likely failure. Independently, the Ohlson accounting model puts its 1-year failure probability at 94% and the market-implied (Merton) default probability is 0.0%. In its favour: cash on hand covers all debt (net-cash balance sheet).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Operating cash flow negative in 3 of the last 3 years.
A business that cannot fund itself from operations depends on external capital to survive.
O-score 2.69 → model probability 94%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Cash covers ~19 months of free-cash-flow burn.
Funding needs within two years make the company dependent on capital-market access.
Price is -61% from its 52-week high.
For financial firms a share-price run often precedes a deposit or funding run (confidence channel).
Operating margin fell from -14750% to -16111% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Cash on hand covers all debt (net-cash balance sheet).
- Strong current ratio (3.16).
- Revenue still growing (+128% YoY).
- High insider/promoter ownership (38%) aligns management with survival.
📰 Recent news scan
- Rafael’s Trappsol Cyclo Misses Primary Endpoint, Targets 2026 FDA FilingYahoo Finance · 2026-10-04
- Cyclo goes forth with Niemann-Pick drug’s approval bid despite Phase III missYahoo Finance · 2026-10-01
- Rafael Holdings Shares Fall 25% After Trappsol Cyclo Phase 3 Trial Misses Primary EndpointYahoo Finance · 2026-09-30
- Rafael Holdings stock tumbles 25% as drug trial misses goalYahoo Finance · 2026-09-30
- Rafael Holdings Announces Topline Results from the Pivotal Phase 3 TransportNPC™ Study of Trappsol® Cyclo™ in Niemann-Pick Disease Type C (NPC)Yahoo Finance · 2026-09-30
- Rafael Holdings Reports Third Quarter Fiscal 2026 Financial ResultsYahoo Finance · 2026-06-11
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Rafael Holdings, Inc.'s financial-health indicators show?
As of 2026-10-08, Rafael Holdings, Inc.'s public financial data places it in the 'Weak' band with a distress score of 51/100, driven by losses in each of the last 3 years, operations consume cash and ohlson o-score signals likely failure. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Rafael Holdings, Inc.'s financial distress score?
51/100 ('Weak'). Ohlson O-score 2.69 (model 1-year failure probability 94%). Merton distance-to-default 5.4 σ (model default probability 0.0%).
What works in Rafael Holdings, Inc.'s favour?
Cash on hand covers all debt (net-cash balance sheet). Strong current ratio (3.16). Revenue still growing (+128% YoY). High insider/promoter ownership (38%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.