Decline of EVR Holdings continues – Buying opportunity or sign that market is losing faith in VR?
Since our coverage last month, virtual reality (VR) business EVR Holdings has seen its multi-month decline continue, with shares now sitting at 6.2p, their lowest price since August last year. Despite its rough patch, EVR, which owns recently-launched VR music platform MelodyVR, has continued to secure major industry deals and remains well funded for expansion. Is the company’s downward trajectory a sign of weakening sentiment towards the VR sector, or does it represent a significant buying opportunity as revenues from MelodyVR begin to pour in?
EVR’s shares enjoyed a brief respite at the end of August, rising 4.3pc on the news that it had secured a significant tie-up with Sony/ATB, the world’s largest music publishing company. The business has signed a multi-year agreement with Sony/ATB Music Europe, which counts the Beatles and Rolling Stones among its signed artists, to licence the distribution of the label’s music library via MelodyVR.
The business said the deal ‘significantly enhances’ MelodyVR’s library of original content, with executive chairman Anthony Matchett adding: ‘I’m very pleased to announce our European agreement with Sony/ATV, the world’s largest music publishing company. This agreement which covers music from many of the world’s top songwriters is vital to the success of our platform, and we’re pleased to have entered into a long-term partnership.’
The news followed a long line of recent deals for MelodyVR, which includes content agreements with Ansco Arena Limited, operator of the O2 Arena London, NEC Group and Alexandra Palace. Likewise, it has previously secured licencing deals with Warner/Chappell Music, Big Machine Label Group, and numerous other publishers and record labels.
Unfortunately for EVR, this burst of positive sentiment failed to stick, and its shares have been in broad decline since the day after the news. Despite a raft of positive updates, the business has been in a rough patch since May, when it launched MelodyVR in the US and UK and raised £25m by placing shares at 16p each. At one point around this time, it shares were trading as high as 18p, nearly three times their current value.
The release of the firm’s H1 2018 results last month did little to help either, with the firm reporting revenues of just c.£7,000 and an operating loss of £4.4m. Despite the firm pointing out that turnover was so low because MelodyVR had launched just weeks before the results period ended, shares fell 4.4pc.
EVR is not on its own, either. The last couple of months have also marked a period of difficulty for other London-listed VR businesses that appear to be making steady operational progress.
For example, VR Education, which pretty much does what it says on the tin, has fallen from 25p to 13.6p since August despite generating revenues and launching new products. The business’s results on Tuesday revealed a 30pc jump in revenues, in line with full-year targets, and a cash position of €4.9m as at 30 June. However, shares were down 5.3pc as at the time of writing. Likewise, newly listed VR player Immotion has fallen from 14.9p to 12.3p despite rolling out its VR experience centres in numerous UK shopping centres and partnering with Legoland Manchester.
So, does this sector-wide shift downwards suggest the market is losing faith in VR’s much-hyped potential? That is very difficult to answer.
On the one hand, the industry is still backed by enormous amounts of support. For example, in September, VR industry forum president Rob Koenen insisted that VR is poised for strong growth over the coming year. He highlighted Greenlight Insights’ statistic that predicts the global VR market will grow to $74.8bn by 2022 from just $14bn in 2017. Likewise, earlier this month, the Global Augmented Reality and Virtual Reality Report claimed that the market will be able to maintain an average annual growth rate of 40.34, which it enjoyed through 2014-2017.
However, for every positive report, there is another with a less optimistic angle. For example, in August, Imax announced that it had closed to of its VR centres and cancelled plans to build a VR camera with Google because ‘the numbers just weren’t there’. Similarly, in June, the IDC’s Worldwide Quarterly Augmented and Virtual Reality Headset Tracker found that shipments of VR headsets were down 30.5pc over the year, totalling just 1.2m units in Q1 2018.
Given the arguments on both sides, whether you want to exposure to the VR sector boils down to your personal belief in its ability to grow. If you do want exposure, then there are worse options out there than EVR Holdings. Aside from the fact that its shares are trading at a considerable discount from its last placing price, the business has ambitious growth plans, a hefty cash balance, and plenty of industry support.