Can virtual gig business EVR Holdings bounce back from its current rut?
Virtual reality firm EVR Holdings has suffered something of a rough patch in recent months, falling from highs of 18p to sit at its current 7.4p. Here, we take a look at whether the former Aim darling could still pull it out the bag, given its healthy cash balance, ambitious growth plans, and the increasing popularity of VR.
EVR is the holding company for MelodyVR, a music platform that uses VR to simulate the experience of being at a concert and allows fans to purchase digital tickets to sold-out, real-world events.
After a period of immense growth, the business has been on a steady decline since May, when it launched MelodyVR in the US and UK and raised £25m by placing shares at 16p each. Despite announcing tie-ups with impressive partners like NEC Group and Alexandra Palace since the placing, EVR has struggled to sustain its rapid rise and shares have suffered as a result.
This situation reached a head this week, when EVR announced its results for H1 2018, reporting revenues of just c.£7,000 and an operating loss of c.£4.4m. As it pointed out, the revenues were so weak because MelodyVR was released just weeks before the result period closed. However, rather than embrace EVR’s positive rhetoric and its £26.1m cash balance, the market ultimately pushed shares down to the level they sit at now, giving the business a market cap of £93.7m
So, with EVR only just launching the product that previously made it AIM’s darling, why has sentiment turned against it so viciously? A theory in the City is that the company was flooded with supply after rising thanks to warrants issued back in its early days. Indeed, as can be seen here, investors with warrants of under 2p rushed to cash in on massive gains when shares sat at 18p. Demand has simply not been able to keep up.
Another argument is that EVR’s decline is merely a question of valuation. After all, the firm is worth nearly £100m despite only just launching its primary product and making just £7,000 in H1. Its decline is unlikely to have gone unnoticed by those who have long called it massively over-valued.
Compounding this point is the fact that it has lost some of its uniqueness over the last few months due to several other VR firms listing in London. EVR is no longer the only way to play a forecast boom in the sector, nor does it even look like the best value in many ways. Indeed, with a £22.6m valuation and stable revenues, VR Education has become an increasingly popular choice among investors since listing earlier this year.
Good times ahead
All this being said, EVR still has a great deal going for it. For example, it boasts impressive support from the music industry including multi-year agreements with Warner/Chappell Music and Big Machine Label Group, as well as six further publishers and record labels. It has also bagged revenue share deals for live and recorded VR content with NEC Group and Alexandra Palace. Most recently, it announced a tie-up with Ansco Arena Limited, operator of the O2 arena.
What’s more, it has seriously ambitious growth plans, which it is funding with April’s placing proceeds. It has said the cash will be used to accelerate expansion and product launches in Latin America, South Korea, China, Taiwan, Japan, Australia and New Zealand.’ It will also be invested in content creation and research & development, marketing, new staff and sectors such as interactive advertising and augmented reality to generate additional revenue streams.
Encouragingly, in last week’s results, chairman and chief executive Anthony Matchett said: ‘Our primary focus during the next twelve months is to drive awareness of the MelodyVR platform, in turn developing our user base in order to further monetise our recorded, live and interactive original VR content. With the development and successful launch of a robust and proven technology platform behind us, backed by global licensing agreements with all of the major record labels and exclusive rights of capture at a significant number of the leading music venues and festivals from around the world, our Company has never been better positioned for on-going success.’
Ultimately, whether or not EVR’s current weakness is of any interest to you is likely to depend almost entirely on your faith in the forecast surge in popularity of virtual reality. As we have written before, although the size of the global VR market remains modest – it was worth around $14bn in 2017 – International Data Corporation expects it to grow to $143bn by 2020. Likewise, market research company Statista estimates that revenues from the sale of augmented reality, virtual reality and mixed reality devices will rise from $7.2bn in 2017 to $84.7bn in 2020.
There could also be a lot of value on offer in virtual gigs – the particular niche of the VR market that EVR has chosen – virtual gigs In August last year, Samsung and Live Nation teamed up to stream a Coldplay concert to millions of fans across more than 50 countries. This was a year ago – in the fast-moving world of VR, who knows where this potentially huge market could end up? Hopefully it won’t peak with Coldplay.
The bottom line is that all the factors that made people excited about EVR Holdings remain in place. With the business preparing for the next stage of its growth after launching its flagship product, those who do buy into the potential on offer may wish to make the most of a drop in its shares.
You can see the latest Melody VR tutorial on how it works
The gadget show unboxed the Oculus Go showcasing through the Melody VR app.
The author does not hold shares but was remunerated to write the article