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Startups

NFT, metaverse shares face correction, hit by high valuations

Investors are wary about the profitability of the budding industry

By Nov 23, 2021 (Gmt+09:00)

▲ WYSIWYG Studios President In-gyu Park at the company's headquarters in May, 2021
▲ WYSIWYG Studios President In-gyu Park at the company's headquarters in May, 2021

Financial shares related to the metaverse and non-fungible tokens, which have been on a surge in recent weeks, are seeing a correction. With foreign investors directing their attention to blue chip stocks, some are concerned the bull run for emerging tech shares is coming to a close. 

Of particular interest to investors are the valuations of such companies, which can be higher than 100 times their price-to-earnings ratios. The P/E ratio is the ratio of a company’s share price to its earnings per share; used to determine whether they are over or undervalued. 

The discrepancy in the price-to-earnings ratio and valuation of these startups' stocks has raised questions about their profitability.

CONTENT SOLUTIONS AND VFX STOCKS PLUMMET

WYSIWYG Studios Co., Ltd., the main metaverse-related share, finished Monday’s trading day at 40,600 won, down 14.1% from the previous session. The Seoul-based company provides technology services to multimedia production.

NP, Inc., a content affiliate of WYSIWYG Studios, also slid 12.4%, despite announcing its plans to establish a separate subsidiary for research and development of Extended Reality, which is a combination of real and virtual worlds generated by computer tech and wearables. The company recently listed on the Kosdaq through a merger with Samsung SPAC 2. 

Giant Step, Inc., an AI-based real-time content solution company, and visual effects provider Dexter Studios Corp., have also slid 14.8% and 13.5%, respectively. 

In the past month, shares of domestic tech startups saw their prices soar after announcing new projects in the metaverse and NFT sphere. 

On Monday, foreign investors purchased 797.6 billion won worth of shares, of which 733.2 billion were electrical and electronics-related stocks on Korea’s main Kospi. 

On Kosdaq, foreign investors unloaded a net 145.3 billion won; reversing the earlier trend of a buying spree of online game companies such as Kakao Games Corp. and NCSoft Corp. 

An analyst with Samsung Securities told The Korea Economic Daily that foreign investors’ demand for large-cap shares means they are now delving deeper into the company’s valuations and performance -- not just the hype around the industries of the future. 

SKY-HIGH VALUATIONS

High valuations are of concern to investors. 

There are some 37 stock items categorized as metaverse- and NFT-related. Their average price-to-earnings ratio is 97.1% higher than the average P/E ratio for all shares combined. 

Their stocks were trading at about 45 times 12-month forward. Their average price-to-book value ratio surpasses 11-fold. The PBR is the market value of a company's stock divided by its tangible net worth.

On the back of the surging popularity of the metaverse and NFTs, the P/E ratio of certain shares including NP Inc., fintech platform provider GalaxiaMoneytree Corp. and software firm ATON Inc. have reached some 150 to 200 times.

Write to Sung-Mi Shim at smshim@hankyung.com

Jee Abbey Lee edited this article.

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