pile-of-money-5Fab is searching for a repeatable business model capable of justifying its $1 billion valuation. But that notwithstanding, a report by Gawker declaring the company dead is irresponsibly premature.

Far from running out of cash, Fab’s biggest advantage is the fact that has such a long runway with which to figure this out. The company raised $165 million last summer.

Simply put: Gawker’s Sam Biddle claims that the company is burning $9 million per month and has just $30 million in the bank are pure fiction. While the company declined specify its exact burn rate, founder and CEO Jason Goldber, emailing Pando from India, writes:

That Valleywag article is complete utter bullshit. We’ve got years and years of cash in the bank at this point.

Pando’s own source put the company’s burn rate is down to less than $4 million. Assuming that rate, last year’s funding would have offered the company more than three years of runway. Thus the idea of the Fab is out of cash and winding things down now just 12 to 18 months later doesn’t jive with reality.

A Fab investor echoed Goldberg’s thoughts, saying only, “Come on, it’s Valleywag.”

Of course there always is the possibility that investors would request a return of capital, but that will be a highly, highly uncommon scenario and doesn’t seem to be the case in this instance. Further, the notion that a company like Fab with a well-known brand, a large (although debatably loyal) audience, and a one-time $1 billion valuation would be wound down rather than sold is absurd. That’s just not how these things happen.

A Fab spokesperson told Gawker that its employees have a minimum guaranteed employment contract of six months, which Biddle took to mean they have a ticking time bomb until being fired. On the contrary, common sense indicates that any such contract would be an effort to provide security and stability for remaining employees following several rounds of layoffs. Most US companies operate under at will employment agreements, meaning rank and file employees can be let go at any time. For Fab to do differently should be viewed as an act of goodwill toward its team. As for Biddle’s claim that Fab NY is down to between 10 to 15 employees, our sources put the figure at at least double that number.

Make no mistake about it Fab has very real challenges as a business, most notably in living up to its lofty valuation. But that notwithstanding the company isn’t going anywhere anytime soon.

I have no doubt that Biddle talked to sources in, or close to the company – likely recently laid off employees – and they told him they wouldn’t be surprised if Fab went bust. The problem is those are likely very junior staffers, or ill-informed ones. It also doesn’t seem that Biddle understands how companies of this scale operate.

The most likely outcome at this stage is that Fab find some sort of repeatable business model, be it flash sales, branded ecommerce, a marketplace, or otherwise. Most likely, that business will fall short of the scale and scale and revenue generation needed to justify a $1 billion-plus valuation to Wall Street or an acquirer. That’s no knock on Fab, but just a reality check on how hard it is to build a real businesses worth $1 billion, as opposed to one valued on the hope of future growth. Should this be the outcome, we can expect Fab either to continue operating as a sort of zomby company or sell at some modest price to a larger acquirer interested in it’s brand and audience.

But none of this is going to take place in the next six months. Fab simply has too much cash in the bank too much work left to do to justify any type of acceptable to exit valuation. As much as Biddle and other Fab critics might like to believe otherwise, were going to stuck with this company for quite a while longer.

Fab spokesperson Amy Juaristi tells Pando, “We have a long-term plan that we and our investors believe in. We still have a lot of work to do and pare heads down. Unfortunately it will take some time to see the results of that effort, but we are excited about where this company is headed.”