Bear Case Emerges for SMX.L Amid Revenue Concerns and Margin Pressure

SMX.L, the publicly traded cybersecurity firm formerly known as Security Matters, has come under scrutiny in a newly published bear case theory. The analysis challenges the company’s reported growth narrative, pointing to a 12% sequential drop in subscription revenue during Q4 2025, which contrasts with prior management guidance of 15%–18% quarterly growth. This reversal raises concerns about customer retention and product-market fit in a competitive landscape. The bear case emphasizes deteriorating profitability, with adjusted EBITDA margins contracting to -8.3% in the last quarter—down from +4.1% a year earlier. Despite a reported $138 million in total revenue for FY2025, operating expenses rose 22% year-over-year, driven by aggressive sales and marketing initiatives. The analysis notes that sales efficiency metrics, such as customer acquisition cost (CAC) payback periods, have stretched to 28 months—well beyond the industry benchmark of 16–20 months. Furthermore, the report highlights a significant increase in deferred revenue churn, with 14% of contracted recurring revenue lapsing within the first 12 months post-signing—up from 7% in FY2023. This suggests potential overreach in sales volume at the expense of long-term customer commitment. The company’s market cap stands at £1.2 billion, placing it among mid-tier cybersecurity players, but its P/E ratio of 42x—based on projected 2026 earnings—appears elevated relative to peers trading between 20x and 30x. The immediate market reaction has been muted, but the publication has triggered increased options activity, with put volume rising 4.3x over the prior week. Short interest in SMX.L has also climbed to 8.6% of float, the highest level in two years. These indicators point to growing skepticism among institutional and retail investors alike.