[Into the Stocks] Wemade, Staggered by Earnings Made with Coins

Stock Price Plummets 60% in 3 Months
Record High Earnings Driven by Cryptocurrency Sales
Poor Game Performance Causes Actual 'Earnings Shock'

[Asia Economy Reporter Hwang Yoon-joo] Wemade, which soared with the label of ‘Metaverse,’ has collapsed in the face of its earnings. The record-high performance was driven not by its core business of gaming but by the sale of the cryptocurrency ‘Wemix.’ Although investors flocked to the Play to Earn (P2E) games, trust in the ‘Wemix’ platform was shaken, causing the stock price to plummet.

Wemade gained attention last year as a ‘Metaverse’ company. In August last year, it launched the game ‘Mir4 Global,’ which applied blockchain technology based on Wemix. The in-game currency ‘Black Iron’ could be converted into the cryptocurrency Wemix, drawing attention as a P2E model where players could earn real money.

The stock price reflected expectations, rising from 50,000?60,000 won in the first half of last year to 107,700 won (September 1, 2021) after the game’s release. It rose again from October, reaching a peak of 237,000 won on November 19. However, in less than three months, it crashed by 59.5% to 95,800 won (February 11).

The biggest reason for the crash was earnings. Looking at the core gaming revenue, it was an ‘earnings shock.’ The performance was driven by the effect of selling the cryptocurrency ‘Wemix.’ Wemade announced that in the fourth quarter of last year, it recorded sales of 352.3 billion won, operating profit of 253.9 billion won, and net profit of 424.7 billion won. Excluding the sale of ‘Wemix,’ sales were 126.9 billion won, operating profit 28.5 billion won, and net profit 199.2 billion won. After the earnings announcement on the 9th, the stock price plunged 28% in one day from 149,900 won to 106,600 won (February 10).

The problem is that the outlook for gaming revenue this year is uncertain. Kim Ha-jung, a researcher at KTB Investment & Securities, said, “Considering the price of Draco in Mir4 and user indicators, sales from new user inflow after the fourth quarter are expected to decline,” adding, “Given that decentralized finance (DeFi) only performs temporary functions in games lacking in-game demand, global sales this year are also expected to be sluggish.”

Wemix liquidity is also pointed out as an obstacle to the stock price. The price of Wemix halved from 13,400 won at the end of last year to 6,545 won on this day. The price of Wemix plummeted after it was revealed that Wemade sold Wemix it held without disclosure to raise 137.6 billion won for the acquisition of SundayToz. Cryptocurrency prices depend heavily on supply and demand. With low expectations for new game user inflow and the possibility of existing users leaving, the situation is challenging.

Researcher Kim analyzed, “Ultimately, the controversy will be resolved when a game that can generate high spending within the Wemix ecosystem appears and the value of Wemix rises.”

This content was produced with the assistance of AI translation services.