A virtual Taiwanese beauty brand is struggling in its Wall Street debut

Hong Kong
CNN business

Taiwan’s latest Wall Street entrant has had a rough ride since going public a week ago.

Shares of Perfect Corp., a software company that allows users to virtually try on makeup or jewelry from brands such as Estée Lauder, LVMH and Shiseido, fell. More than 40% of the listing price since they started trading on the New York Stock Exchange a week ago.

Perfect Corp provides its technology to beauty and fashion brands. It uses augmented reality and artificial intelligence to help users try products online before buying.

The company’s valuation rose to $1 trillion just days before it listed with Provident Acquisition Corp., a special purpose buyout company (SPAC). Shares of the newly combined business began trading last Monday under the ticker symbol “PERF” and have since fallen about 46% from their opening price of $15.80.

The broader S&P 500 has lost roughly 14% over the past five days, according to data provider Refinitiv Eikon.

SPACs are shell companies with limited or no operating assets. They usually go public to raise money from investors, which is then used to buy existing businesses.

Daniel Ives, managing director and senior equity analyst at Wedbush Securities, said investors may be wary of Perfect Corp. because “in a risk-averse market, an augmented reality game with Taiwanese roots is a glass-half-empty name “.

“Tech stocks have been weak and any added geopolitical risk will be a concern in this market,” he told CNN Business.

Taiwan is a self-governing democratic island that Communist leaders in Beijing have long claimed as part of their territory, although they have never ruled over it. Since Russia’s invasion of Ukraine this year, some foreign investors have expressed concern about the risk of China increasing its military force against Taiwan.

Perfect Corp. said it raised approximately $119 million in the deal.

The company chose to list in the United States because much of its customer base is there, founder and CEO Alice Chang said in an interview with CNN Business. She said she was wearing her “digital makeup” and virtual earrings during the video call.

Chang founded Perfect Corp. founded in 2015 as part of a unit of Cyberlink, a Taiwanese technology company, and later spun off as a separate business. Cyberlink remains one of the company’s investors, along with global brands such as Chanel, Goldman Sachs ( GS ) and Snap ( SNAP ).

Chang said the company would use the proceeds from the SPAC merger to expand into Southeast Asia, fund research and development, and double down on new capabilities in its technology, such as allowing users to try accessories beyond jewelry.

“In jewelry, we got into fashion,” he said. “This is just the beginning.”

Perfect Corp. is part of the software as a service the industry The company now has offices in cities around the world, including New York, Paris, Tokyo and Shanghai, and covers more than 450 brands, Chang said.

It had $40.8 billion in revenue last year, and aims for sales of more than $100 million by 2024, according to regulatory filings.

It all started with a selfie, according to Chang.

About nine years ago, Chang often took photos of herself to share with friends and family, often wishing there was a way for users to instantly tone down a look. The idea eventually led to a mobile app called YouCam, which allows users to instantly touch their skin without looking “fake”.

The question was, “How can I connect virtual beauty with real-world beauty?” Chang recalled. “If you leave, I think [the] the more the user tries, the more he will buy.’

That assumption has led the company to brands in its field, even though popular consumer platforms like Instagram offer similar filtering technology.

Perfect Corp. is one of the few Taiwanese companies to list in the United States in recent years, according to Dealogic data.

Its arrival comes just months after Gogoro ( GGR ), a Taiwanese electric scooter startup backed by Al Gore and one of Apple’s biggest suppliers, had its day on Wall Street. The company also went public in New York after merging with a SPAC in April, raising at least $335 million in cash. Its shares are down 68% this year.