Virtual reality (VR) business Immotion (LSE:IMMO) took a 14.6pc hit on Tuesday after announcing a £2m placing and major change in its strategy.
Alongside its own consumer-facing range of CGI and live-action VR experiences, Immotion has been offering its products to third parties through both a straight sales model and a revenue-share model with partners. Following positive feedback over the past year, the business has decided to focus its strategy on the accelerated roll-out of this partnership model into high footfall locations like shopping centres moving forward.
In an update, the business that it believes that this focus will deliver the most significant possible value for shareholders. This is because it builds recurring revenue streams, rather than one-off payments, with high-quality partners like the O2, Al Hokair, Merlin Entertainments, Shedd Aquarium, and Santa Barbara Zoo.
It added that the model is already enjoying rapid growth, with over 34 new VR headsets contracted by partners that are due to be installed in the coming weeks. Meanwhile, a further 118 headsets have been agreed, subject to contract, giving the business visibility to c.389 headsets.
To support the accelerated roll-out of its partnership model, Immotion will carry out a £2m fundraising at a price of 6.75p a share. The company has also authorised its brokers – WH Ireland and Alvarium Capital Partners – to raise up to a further £500,000 through a broker option.
Immotion’s chief executive Martin Higginson said the strategic shift was vital as the company approaches EBITDA breakeven. Based on current headset yields, the firm expects to hit overall monthly EBITDA breakeven at around 410 installed headsets – a milestone that it plans to reach in the first quarter of next year.
“Since inception we have invested heavily in building a range of VR experiences, the quality of which has not been seen before at affordable price points in the ‘out-of-home’ VR market. This fact, combined with our proprietary reporting software, themed stands and on-going investment in VR motion platforms has positioned us well in this nascent market,’ said Higginson.
‘However, it has been our determination to create a new and exciting business model that has and will define us. Creating a Partnership Solution where we work together with high footfall leisure locations to provide them with not only a new and interesting attraction, but also a valuable ancillary revenue stream has transformed our business. Demand from high quality aquaria partners is very strong and we are beginning to see demand from other verticals. Our continued focus in creating not only the right environment as well as VR experience for our partner, is starting to show encouraging signs with revenues in our Partner estate growing strongly. The performance of our aquaria partners is particularly strong and the Directors see this as a highly scalable, potentially global opportunity.’