Shareholders of 17Live Group must be feeling they have gotten a raw deal. Since its Dec 8 trading debut as the first pure-play live-streaming platform on the Singapore Exchange S68 (SGX), the stock has tumbled more than 60%. Based on the $5 IPO price of the special purpose acquisition company (spac) that 17Live was folded into, the pullback has been even more severe.
That is one of the worst performances in the history of the local market for a new listing. Even proponents of value investing appear apprehensive about taking a nibble, for fear of catching a falling knife.
Anyone watching the stock must be wondering what went wrong. Ordinarily, listed companies that are the best in what they do have no lack of followers. If so, 17Live as the market leader by revenue in Japan and Taiwan should have had a much warmer reception from investors.
Are investors in Singapore not familiar with live streaming and how it makes money? Is SGX the right venue for businesses seeking to go public through mergers with blank-cheque companies? Or are businesses that go down this route destined for failure, as seen from the bankruptcies and fire sales that many firms in the US found themselves in not long after merging with a spac?
During their roadshows to promote their IPOs just over two years ago, the sponsors of all three SGX spacs — Vertex Technology Acquisition Corporation, Novo Tellus Alpha Acquisition and Pegasus Asia — proudly touted their track record for picking winners and creating value for their stakeholders.
A common thread in all their sales pitches was their experience and forte in the tech space. This could be anything from deep tech to fintech (financial technology), medtech (medical technology) or consumer tech.
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Impressive as the sponsors may sound, all three were late in the game by the time their spacs hit the market in January 2022. That’s several quarters after spac fever in the West peaked. Blank cheque companies in general have since fallen out of favour with investors.
Besides being late for the spac party, SGX is not known to be an exchange heavy on tech, unlike Nasdaq for example. There is only one tech stock in the benchmark Straits Times Index — Venture Corp. As a brick-and-mortar contract electronics manufacturer that has been around for over three decades, Venture is familiar to investors.
Most other tech companies listed on SGX are also in the hardware space, whether as manufacturers, testers or distributors. Those focused on software are usually developers, systems integrators or resellers.
Be it hardware or software, many of these tech companies are generally well understood by investors, who can simply refer back to their latest order book or recurring income streams, if any, to get a pulse on their business.
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Against this backdrop, 17Live comes across as an anomaly. Live streaming is less predictable as a business. That is because users — people who go online to get their entertainment fix from influencers and streamers — can be highly fickle and are spoilt for choice in a world where content on just about anything is so readily available.
Vertex Venture Holdings, a subsidiary of Temasek Holdings and the sponsor behind the spac that merged with 17Live, acknowledged as much. In a circular to shareholders late last year, it said that with the constantly changing “live social entertainment industry” in Asia, “there are few proven methods of projecting user demand or available industry standards on which (17Live) can rely, and (17Live) has to constantly develop and update its monetisation strategies”.
That helps explain 17Live’s patchy financial performance in recent years. It is also why the live-streaming platform, like many tech start-ups, touts financial metrics like adjusted ebitda, price-to-sales, and enterprise value to ebitda as better indicators of its worth and how it is faring.
But in a market like Singapore where investors are more attuned to more traditional and common metrics such as net profit, cash flow, and dividend yield, it is not hard to see why shares of 17Live have not gained much traction.
17Live has its work cut out in trying to get some love from investors. Bigger rivals such as Hong Kong-listed Kuaishou Technology and Amazon’s Twitch are slogging to rein in costs while attempting to keep their audiences engaged. Both Kuaishou and Twitch have gone through extensive restructuring and intend to do more in an effort to stem losses and turn profitable. Just over a week into 2024, Twitch has said it would cut 500 jobs, representing 35% of its workforce.
If any good has come out of 17Live’s dismal stock performance, it is probably that shareholders of the other two SGX spacs — Novo Tellus Alpha Acquisition and Pegasus Asia — will be spared a similar bloodbath. Just days before Christmas, Pegasus Asia announced it would not proceed with a business combination, citing market conditions. Novo Tellus Alpha Acquisition threw in the towel earlier this month after initially denying media reports that it would be dissolved.
The writer is a former financial journalist and runs an investor relations consultancy practice. He is also a part-time business journalism lecturer at a Singapore university. All views expressed are solely his
