LIVESTREAMING platform operator 17Live Group : VT1 -4.14% is confident that investors will eventually come to understand and invest in the booming content creator industry.

 

Chief technology officer Ng Jing Shen said the Taiwanese platform is planning to create a &ldquo rigorous investor relations programme&rdquo to help investors understand the merits of the livestreaming industry &ndash which will, in turn, benefit the company.

 

&ldquo Right now, we are the only opportunity for investors who wish to be a part of this growing creators&rsquo economy,&rdquo Ng said in an interview with The Business Times.

 

Despite the optimism, the company has not started off with its best foot forward.

 

On Dec 8, the platform traded for the first time on the Singapore Exchange&rsquo s mainboard, after it successfully completed its business combination with Vertex Technology Acquisition Corporation (VTAC), a special purpose acquisition company (Spac).

 

The move marked a couple of firsts &ndash 17Live is the first livestreaming platform to be listed here and the first de-Spac transaction to be completed in Singapore.

 

However, its share-price performance did not reflect investor confidence in such milestones. The counter tumbled 18.8 per cent or S$0.73 on its first day of trading to S$3.15. It has since fallen further, closing on Monday (Dec 18) at S$1.62.

 

Before its trading debut, VTAC&rsquo s shareholders expressed their lack of confidence in the listing by redeeming close to two-thirds of the share capital of the Spac.

 

When asked about the high level of redemptions, Ng said the market likely does not understand the &ldquo high-growth creator industry&rdquo and therefore does not see the value of investing in such shares yet.

 

He added: &ldquo The whole investor base here and in the region is still new to livestreaming and to Internet stocks in general.

 

&ldquo We need time to educate investors about the industry&hellip and how to look at an Internet growth stock compared to traditional media.&rdquo

 

17Live&rsquo s listing is the first de-Spac transaction completed in Singapore. PHOTO: 17LIVE

Ng, who is Singaporean, entered the company with 17Live&rsquo s chairman Joseph Phua in 2017, when the duo&rsquo s dating app Paktor merged with 17Live for an undisclosed sum.

 

17Live, then known as 17 Media, was founded in 2015 by Jeffrey Huang, who stepped down from the board in 2020.

 

Ng said the company had chosen a Spac listing due to the growing popularity of livestreaming, and had wanted to capture this growth.

 

After all, the content creation industry appears to be thriving. In a report this year, Goldman Sachs Research estimated the total addressable creator economy to be worth some US$250 billion.

 

The research house expects it to roughly double in size by 2027 to US$480 billion, with the current 50 million global creators to grow at a 10 to 20 per cent compound annual growth rate over the next five years.

 

Expansion

Although content creation is on the rise, 17Live recorded a loss of US$118.2 million for the first half ended June, widening from a US$42 million loss in the corresponding year-earlier period.

 

It also registered a full-year loss of US$51 million for FY2022.

 

After accounting for revaluation loss at fair value for certain preferred shares and warrants, the group would have posted an adjusted profit of US$9.4 million for H1 FY2023.

 

This revaluation loss on financial liabilities is not expected to recur after the completion of the deal, the company said.

 

Nonetheless, Ng highlighted that 17Live has been generating operating profits and is Ebitda (earnings before interest, taxes, depreciation and amortisation) positive since FY2020.

 

The core business is also cash-flow generative, Ng said.

 

17Live&rsquo s growth drivers include its V-Livers, or livestreamers who use a computer-generated character to represent themselves. PHOTO: VTAC

He added that the money will be used to fuel 17Live&rsquo s growth, particularly in the field of V-Livers &ndash livestreamers who don a virtual avatar and usually embody a specific personality in this form.

 

The company aims to use this listing as an opportunity to expand into a new geographical location. Ng believes South-east Asian livestream viewers are generally interested in such streamers &ndash and Singapore&rsquo s position as a regional centre makes it the ideal place to list.

 

He added that the company will eventually sign on talent from South-east Asian countries. &ldquo We will try to import some of our top talent from these places and make it available here, including their merchandise,&rdquo he said.

 

Content is king

The company banks heavily on its content creators, using a revenue split model where it takes a cut of what its creators earn. Ng declined to reveal the split between company and creator.

 

Unlike other streaming platforms such as Twitch and YouTube, 17Live exclusively signs and manages the creators on their platform with its in-house management team.

 

At the last count, the company had 87,000 contracted streamers, who earn money through virtual gifts that fans can buy on 17Live.

 

These viewers who spend money on streams are tracked by 17Live as &ldquo quality users&rdquo &ndash a metric that the company wishes to grow.

 

&ldquo The essence of livestreaming is finding a creator that you really love and are willing to support,&rdquo said Ng, who added that the number of such viewers is growing.

 

As at the first half of FY2023, the company has around 550,000 average monthly active users. These users have a spend rate of 16.1 per cent, on a monthly average basis.

 

The average revenue per spending user is US$302, the company said.

 

Ng explained that quality users are important to 17Live, as the group does not make money from advertisements.

 

He said: &ldquo We don&rsquo t chase large view numbers. What we chase is people who have found the creator that they love.&rdquo

 

Since the business combination was completed on Dec 8, 17Live has been in the red every day.

THE mainboard listing of live-streaming platform operator 17Live Group, following its business combination with Vertex Technology Acquisition Corp (VTAC), came with much fanfare.

 

The listing &ndash two years after the special purpose acquisition company (Spac) framework was launched in Singapore &ndash brought to the market a &ldquo new economy&rdquo company that investors have long lamented was missing from the local bourse.

 

Instead of being well-received by investors, however, 17Live shares have been on a steady slide. The counter has now plunged to around a third of what investors paid per share at VTAC&rsquo s initial public offering (IPO).

 

For those who have been tracking developments relating to this deal, or monitoring broader trends for Spacs overseas, 17Live&rsquo s dismal performance is unlikely to be surprising.

 

But pushing ahead with the listing &ndash despite signs that the deal would not be well-received &ndash could have put a dent in Singapore&rsquo s broader ambitions to attract tech growth stocks.

 

The government, together with the Singapore Exchange (SGX) and Temasek, launched various initiatives in 2021 in a bid to achieve the goal of making the Republic &ldquo the listing destination of choice for local and global market leaders&rdquo , especially from high-growth and high-tech sectors.

 

This was in addition to various initiatives that were already in place, including allowing dual-class shares &ndash which are favoured by entrepreneurs &ndash as well as introducing the Spac framework in September 2021.

 

Three locally listed Spacs made their debut in early 2022, raising over S$500 million in total, and bringing with them high expectations that they could help boost listings and trading volumes on the SGX.

 

Disappointing performance

The first de-Spac to be done, however, clearly leaves much to be desired for investors.

 

Since the business combination was completed on Dec 8, the counter has been in the red every day. The sell-off had already started earlier in December, when it was still trading as VTAC.

 

Notably, there were five consecutive days of double-digit declines from Dec 7 to 13, which saw the counter plunge from S$4.49 to S$1.89.

 

It is important to note that investors of VTAC could have redeemed their capital for S$5.01 per share. Those who chose to stay put are now staring at hefty losses, with 17Live&rsquo s closing price of just S$1.62 on Dec 18.

 

Even factoring in the 10 per cent bonus shares that non-redeeming shareholders would receive, an investor&rsquo s current stake in the company is worth 64.4 per cent less than what they would have received had they redeemed their investment a few weeks ago.

 

17Live&rsquo s performance isn&rsquo t that unusual, considering that most Spacs in the US also suffer the same fate of plunging prices post-de-Spac.

 

The local Spac regime was rolled out amid surging popularity of Spacs in the US in 2020 and 2021, but the boom for such instruments has already fizzled out amid tighter liquidity and greater investor scrutiny.

 

Market conditions and investor appetite for growth stocks have also shifted drastically given higher interest rates.

 

Beyond global trends, there were clear signs that investors&rsquo interest in this deal was lacking.

 

Spacs typically raise a Pipe round during their business combinations for additional capital, which could also be useful if IPO investors decide to redeem their capital.

 

The participation of Pipe investors at the business combination stage can also serve as validation for the valuation of a target company, as such investors would typically carry out their own due diligence.

 

VTAC raised only S$3 million in Pipe funding, much lower than earlier illustrations for a S$10 million round. The Pipe was also just a fraction of the over S$200 million the Spac had in its escrow account.

 

Both independent research houses commissioned by the Securities Investors Association (Singapore) or Sias also recommended that investors redeem all their capital and sell their warrants.

 

Apart from the high price that was being paid, there were also concerns over 17Live&rsquo s growth prospects amid falling revenue.

 

Returning capital

Spacs are prized for their certainty of price and execution. But given the signs that investor appetite was lacking, one can&rsquo t help but wonder whether liquidation would have been better for both VTAC&rsquo s investors as well as for the broader ambitions to foster a conducive environment for growth stocks.

 

For SGX to be more appealing, it would have been preferable if the first de-Spac in Singapore was one that could hold up its deal valuations in public market trading.

 

Of course, this may not always be possible. But there is always the option of returning capital and waiting for better conditions.

 

Large US Spacs that were sponsored by private equity giants KKR, TPG and Warburg Pincus have liquidated and returned capital to investors in 2022 and 2023.

 

A positive takeaway in the Singapore market is that the majority of independent investors took the matter into their own hands and followed the recommendation of the Sias-appointed research houses.

 

Shareholders exercised their redemption right for some 26 million shares. Excluding the holdings from two VTAC shareholders &ndash Vertex Co-Investment Fund (Vertex SPV) and Venezio Investment &ndash which had committed not to redeem their shares, the redemption rate would be 87.9 per cent.

 

Notably, Fullerton Fund Management, which was a cornerstone investor and an indirect subsidiary of Temasek, also opted to fully redeem its 2.6 million shares.

 

Having a counter lose nearly two-thirds of value in a couple of weeks is unlikely to help convince investors of the merits of investing in growth stocks via the Spac route.

 

It is also hard to imagine entrepreneurs being more enthusiastic about listing in Singapore now. One can only hope that the lacklustre performance will not be a setback for its longer-term ambitions to be a listing destination of choice for tech and growth stocks.