Listed on KOSDAQ at an IPO price of 15,500 won on August 20 last year
Failed to meet revenue estimates presented for IPO pricing
2024 revenue estimate of 23.4 billion won vs. actual 13.9 billion won
Shares of K3i have remained at about 30% of their IPO price just one year after listing on the KOSDAQ market. Except for the day of the listing, the stock has never recovered its IPO price. Although K3i executives purchased company shares from late last year through early this year in an effort to enhance shareholder value, the stock price continues to languish at the bottom.
According to the financial investment industry on August 12, K3i's share price has dropped 69% compared to its IPO price since its listing on August 20 last year. The continued decline appears to be due to the company's failure to meet the revenue projections presented at the time the IPO price was set.
Founded in 2000, K3i is a provider of extended reality (XR) solutions for immersive interactive content production. The company developed Korea's first augmented reality engine (MovAR SDK) technology. It has succeeded in internalizing core technologies across physics engine-based augmented reality (AR), virtual reality (VR), and mixed reality (MR). K3i offers the Universe XR Framework, an XR middleware solution that can be universally applied when developing various XR services.
The company has a strong track record in securing public procurement projects and supplies smart factory simulation and AR equipment content to major domestic conglomerates. In the first quarter of this year, consolidated sales were KRW 3.6 billion, with the XR business accounting for 69.7% and the digital twin and other segments making up 30.3%. Last year, the company recorded sales of KRW 13.9 billion and an operating loss of KRW 3.7 billion.
At the time of the IPO last August, lead underwriter Hana Securities projected that K3i would achieve sales of KRW 23.4 billion and operating profit of KRW 4.6 billion in 2024. Although sales in the first half of 2024 were only KRW 6.2 billion, the company explained that it expected a sharp increase in sales in the second half. K3i anticipated that the immersive XR content market would grow explosively and the digital twin construction market would open up, leading to higher revenues.
When determining fair corporate value, K3i applied an annual discount rate of 20% based on a projected net profit of KRW 8.8 billion for 2025. The company estimated sales of KRW 34.6 billion and operating profit of KRW 9.8 billion for 2025. Using an average price-to-earnings ratio (PER) of 24.6 times for comparable companies, K3i's valuation reached KRW 163.7 billion. The IPO price was set at KRW 15,500, reflecting a 25.8% discount from the valuation.
In early August last year, when the demand forecasting for the IPO price was conducted, the KOSDAQ market plunged. On the final day of demand forecasting, August 5, 2024, the KOSDAQ index dropped 11.3%. As investor sentiment weakened, the final demand forecast competition ratio was only 239 to 1. Despite the low competition, the lead underwriter and K3i set the IPO price at the upper end of the desired range.
An official from the financial investment industry commented, "If you look at the stock prices of newly listed companies after one year, the majority are trading below their IPO prices," adding, "It is time to consider various supplementary measures to address the issue of inflated IPO pricing."
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