After a nearly 40% surge in stock price in the middle of last month, “Keep,” known as the leading sports technology company, has experienced another sharp decline.
On January 4th, the Hong Kong stock market fell more than 30% during trading hours, hitting a low of HKD 9.00 per share, with a decline of 34.11%, reaching a new all-time low since its listing. This marks the company’s seventh consecutive day of decline, with the current total market value at approximately HKD 4.73 billion (＄0.6 billion), less than one-third of its market value on the day it went public.
Since its listing on the Hong Kong Stock Exchange in July last year, Keep has shown impressive stock performance. It once reached a high of HKD 42.2 per share in August, with a market value exceeding HKD 20 billion (＄2.6 billion), an increase of nearly 30% compared to its IPO valuation. However, since then it has fluctuated around HKD 35 per share and officially fell below the issue price in early October.
The first encounter with a cliff-like drop for Keep happened one month ago. On December 1st of last year, the Shanghai Stock Exchange announced an adjustment to the list of eligible stocks for the Hong Kong Stock Connect program, and Keep, which had been listed for less than five months, was included as a candidate stock. This change officially took effect on December 4th. This means that qualified domestic investors can also buy shares of Keep.
This was originally good news, but it triggered panic among investors. On that day, Keep opened at HKD 29.35 per share and closed at HKD 20.9 per share, with a decline of 27.56%.
Looking at the sharp drop in Keep’s stock price today, there doesn’t seem to be any direct factor on the news front. Keep has also responded by stating that they have not received any information. However, according to analysts’ observations, this is likely related to Keep’s overall financial performance in 2023, which has led investors to lack confidence to some extent.
In the first six months of last year, Keep’s total revenue was 985 million yuan, a decrease of 2.7% compared to the previous year; operating profit loss was 261 million yuan, a narrowing of 21.39% compared to the same period in 2022; adjusted net loss (Non-GAAP) for the reporting period was approximately 223 million yuan, with a net loss rate of approximately 22.7%, an increase of 8.7 percentage points compared to the first half of 2022.
This is the first time that Keep has experienced a year-on-year decline in revenue since announcing its financial statements. In the three years prior to this, Keep’s revenue increased from 1.1 billion yuan in 2020 to 1.6 billion yuan in 2021, representing a year-on-year growth of 46.3%, and further increased to 2.21 billion yuan in 2022, with a year-on-year growth of 36.6%.
The decline in revenue has prompted investors to reevaluate Keep’s business model. In the first half of last year, Keep’s own-brand sports product revenue was 466 million yuan (＄65 million), a decrease of 9.5% compared to the previous year. The company stated that this was mainly due to a decrease in sales of health food products. The competition in this market sector is becoming increasingly fierce. Additionally, its advertising revenue also declined to 69.437 million yuan (＄10 million), a year-on-year decrease of 21.4%.
In fact, the extent to which Keep’s consumer brand revenue can synergize with its user base has always been a concern in the industry. Its advertising revenue is directly related to the size of monthly active users. As of June 30, 2023, the average monthly active users on the platform were approximately 29.549 million, a decrease of 8.129 million compared to the previous year; and the average monthly subscription users were approximately 3.017 million, a year-on-year decline of 17.68%.
It should be pointed out that in the first half of 2023, Keep achieved a revenue of 449 million yuan (＄63 million) from member subscriptions and online paid content, a year-on-year increase of 10%. This is mainly due to the company organizing a large number of virtual sports events such as running and cycling, as well as collaborating with well-known IPs such as Hello Kitty and Crayon Shin-chan. Users participating in these events need to pay registration fees ranging from tens to over one hundred yuan, and they can receive physical medals upon completion. This series of activities has attracted many users’ participation on social platforms.
Entering 2024, Keep still needs to prove to investors the sustainability of its business model and compete against similar competitors. At the same time, it faces the perennial challenge of sluggish user growth that is common among internet companies. These issues are precisely the key factors in boosting investor confidence.