For years, Canopy Growth (CGC 2.41%) was one of the safest cannabis investments. That was due to the billions in cash it had on its books thanks to an investment from alcoholic beverage maker Constellation Brands. But for years, Canopy Growth also continued to burn cash.

Now, its cash balance is tighter, and the business is still using up tons of money. Is the company in the midst of a cash crunch, and if so, what does that mean for investors?

Canopy Growth is raising money through a private offering

On Jan. 18, Canopy Growth said that it entered into an agreement with institutional investors to raise $35 million. This is not unusual for businesses that are growing, and it's one of the reasons investors need to exercise caution when it comes to companies that are in their early growth stages.

Canopy Growth says that it's using the proceeds of the offering for a variety of reasons, including to pay down debt and for general corporate purposes, which can mean just about anything. In short, the company needs the money to keep afloat and likely to pay bills. But there could be a need for greater cash infusions in the future.

Is Canopy Growth in a cash crunch?

As of Sept. 30, Canopy Growth reported cash and cash equivalents totaling 240 million Canadian dollars ($178 million), down from CA$668 million six months earlier. That's a troubling number for the business when you consider just how rapidly Canopy Growth has been going through cash. During the past two quarters, the company has used just under CA$173 million for its day-to-day operating activities. Although that's less than a year ago when it was about CA$222 million, that averages out to CA$87 million cash burned per quarter, implying that its current cash balance may not be enough to last an entire year.

Another sign that the company is in trouble: It's selling pieces of its business. Last month, Canopy Growth completed the sale of wellness business, This Works, and its sports nutrition company, BioSteel. Although the moves should slow the cash burn rate, they will also result in a weaker top line. BioSteel was often seen as one of Canopy Growth's bright spots, generating stronger growth than other business units.

The company appears to be more concerned about its cash position, and rightfully so. And these latest moves do suggest there could indeed be a cash crunch and pressure on the company to slash whatever expenses it can.

Should investors be worried?

If you're a Canopy Growth investor, you likely know by now the huge risks that come with owning the stock. This is, after all, a stock that has lost a whopping 99% of its valuation during the past three years; this isn't an investment that's attracting many risk-averse investors. Odds are that most investors know there are considerable risks involved here. But has that risk reached an even higher level?

Last year, the company told investors there were going concern issues, which essentially means that the business may not be able to survive for another year. In all likelihood, Canopy Growth will still be around a year from now, but its business may be much smaller as it continues to get leaner and as it raises money through offerings. But that shouldn't give investors any comfort, because that risk is not going away anytime soon.

Overall, I don't think the company's position has worsened. And these recent transactions should give it some breathing room, but Canopy Growth remains a very risky stock to own.

Canopy Growth isn't a suitable investment for most investors

There isn't much reason to invest in Canopy Growth these days. The stock has turned into a largely speculative buy, and its abysmal financial condition should turn off the vast majority of investors. Even contrarian investors may be better off pursuing other growth stocks.

Canopy Growth simply isn't worth the risk. Its valuation is low for a reason, and investors shouldn't rule out the possibility that its share price could fall even more this year.