With Mounting Earnings Losses, Investors Should Pass on Society Pass
Investing in initial public offerings (IPOs) can be fun and profitable if you pick the right ones. Nevada-based Society Pass (NASDAQ:SOPA) just had its IPO in November of 2021, and SOPA stock is tradable today on the Nasdaq exchange.
Society Pass describes itself as a “leading Southeast Asian data-driven loyalty platform.” The company has over 1 million registered consumers, more than 3,000 registered merchants, and a strong market presence in Singapore, Vietnam, the Philippines, and Indonesia.
Don’t get the wrong idea. Society Pass is still a relatively small company with a market capitalization of around $200 million at the end of 2021.
Still, small businesses can grow into big ones — if they’re profitable, that is. Indeed, whether Society Pass has the financial wherewithal to thrive in the long run is a question worth asking.
A Closer Look at SOPA Stock
SOPA stock started trading on Nov. 9, 2021, after Society Pass had priced its IPO at $9 per share. The stock immediately went into a hype phase after the IPO. Amazingly, on Nov. 10, it topped out at $77.34.
You can probably guess what happened next. This pop-and-drop story has been told many times with IPO stocks over the past few years. Gravity set in quickly as SOPA stock plummeted back to $9 by the end of November. On 2021’s final trading day in December, the stock closed at $10.41.
From monster gains to monstrous losses, Society Pass’s early investors went on a roller-coaster ride and hopefully learned a few lessons along the way.
Major Index Inclusion
Among those lessons is: don’t go chasing after hyped-up IPO stocks unless you’re willing to risk losing your money.
But hey, at least there’s been some good news along the way. In December, SOPA stock got a temporary boost after Society Pass revealed that it was being added to the Russell 2000 index. This index measures the performance of the small-cap segment of the U.S. equity market.
Apparently, the investors appreciated this development as they pushed the Society Pass share price up to $20 within a few days of the announcement. The enthusiasm faded quickly, however. As discussed earlier, SOPA stock fell back to $10 and change by the end of 2021.
Getting listed on the Russell 2000 is notable, but informed investors should want to know whether Society Pass gets a pass or fail rating in terms of its financial stats. So, let’s get into that now.
Hard Numbers to Swallow
In December of 2021, Society Pass proudly issued a press release declaring that the company had issued its first Securities and Exchange Commission (SEC) Form 10-Q (quarterly financial report).
That’s all fine and good, and I suppose it’s a milestone of sorts. Also, Society Pass Chief Executive Officer Dennis Nguyen bragged that his company’s September launch of its LeFlair e-commerce platform business in Vietnam went “extremely well.”
What’s eyebrow-raising about that press release is that no hard data was provided from the 10-Q. So, of course, I did some digging and found the actual numbers.
According to the SEC form, Society Pass generated $83,534 in revenues during 2021’s third quarter. That’s definitely an improvement over the $11,629 generated during the year-earlier quarter.
Turning to the bottom line, however, the picture is much darker. In 2021’s third quarter, Society Pass managed to incur a net earnings loss of $8,429,267. This result is significantly worse than the already worrisome $1,626,993 net earnings loss from 2020’s third quarter.
When we extend the time frame, it doesn’t look any better. During 2021’s first three quarters, Society Pass reported a staggering net earnings loss of $15,528,998.
The Bottom Line on SOPA Stock
Investors might be intrigued by the prospect of investing in a Southeast Asia-focused e-commerce IPO. Plus, Society Pass’s Russell 2000 inclusion is certainly a noteworthy milestone.
On the other hand, Society Pass doesn’t pass muster on the financial front as the company’s net earnings losses are growing. Therefore, it’s advisable to avoid SOPA stock until the company provides a more favorable fiscal profile.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
