[Into the Stock] Sconex Stock Price Surpasses IPO Price Despite Achieving 20% of Sales Target

Extended reality (XR) content company Sconex announced earnings that fell significantly short of sales forecasts. Nevertheless, the market remains optimistic about Sconex's future vision, and its stock price is still trading above the initial public offering (IPO) price.

According to the Financial Supervisory Service's electronic disclosure on the 7th, Sconex reported sales of 3.7 billion KRW and an operating loss of 4.5 billion KRW last year. Sales dropped by more than 40% compared to the previous year, and the operating loss widened by 38%. Net loss also increased to 4.3 billion KRW.

Sconex stated, "The release of VR games was delayed, and revenue recognition for contracted projects was deferred to the next period, resulting in decreased sales," adding, "Operating losses also increased due to higher operating expenses such as R&D investment and labor costs, as well as an increased ratio of fixed costs."

Specifically, Sconex had planned to release the sequel to Combat Arena, launched in 2020, last year but postponed the release to January 2024 after receiving investment from Meta. Regarding contracted projects, Sconex is working with the Ministry of National Defense, Cheil Worldwide, and others; since these projects are still ongoing, revenue will be recognized upon their completion.

Sconex's recent performance shows a significant gap from the projections presented at the time of its listing last year. Sconex was listed on the KOSDAQ market in February last year through a technology special listing.

The technology special listing is a system that lowers the listing threshold for companies with promising visions but without immediate earnings. Accordingly, technology special listing companies set their IPO price based on projected post-listing performance rather than current earnings at the time of listing.

Sconex assumed a net profit of 13.6 billion KRW for 2024 and applied a 25% annual discount rate to calculate a corporate value of 209.7 billion KRW. Just before listing, Sconex's performance was sales of 6.1 billion KRW, operating loss of 3.3 billion KRW, and net loss of 3.8 billion KRW.

At that time, Sconex projected a turnaround to profitability starting in 2022, with substantial annual growth in performance. According to those projections, Sconex expected sales of 17.4 billion KRW, operating profit of 1.8 billion KRW, and net profit of 1.7 billion KRW in 2022. However, actual sales achieved only 20% of the forecast, and losses increased.

Nonetheless, Sconex's stock price is trading around 16,000 KRW, higher than the IPO price of 13,000 KRW. This is attributed to the market's positive evaluation of the synergy effect from collaboration between Sconex and Meta. In December last year, Sconex announced that it would develop the first-person shooter (FPS) VR game "Strike Rush" for the Meta platform, with partial development funding from Meta.

Researcher Cho Jeong-hyun of Hana Securities analyzed, "Meta's VR device Oculus holds about 70% market share in the XR market, ranking first, so there is potential for Sconex's game sales to expand," adding, "Since Sconex has XR content supply references, additional collaboration possibilities with other platform holders are encouraging."

However, some concerns have been raised that the expiration of lock-up agreements last month for institutional investors who invested in Sconex before its listing could pose an overhang (potential selling pressure) risk. The major shareholders whose lock-up has been lifted include Korea Investment Empord No.1 New Technology Business Investment Association (11.54%), Empord-Sconex Private Investment Association No.1 (8.69%), and Korea Development Bank Venture Technology Finance Office (4.89%).

Regarding this, a Sconex representative said, "Empord is a partner that positively evaluates Sconex's long-term company vision," and added, "Empord plans to transfer shares to long-term investors rather than selling large volumes in the market in the short term."