Vertex Technology Acquisition Corporation (VTAC) has signed a conditional sale and purchase agreement (SPA) with 17LIVE Holding where both companies will come together to form 17LIVE Inc.
17LIVE Inc. will then become a publicly-listed company on the Singapore Exchange S68 Securities Trading Limited (SGX-ST). The proposed business combination is subject to SGX-ST’s approval and VTAC’s shareholders at an extraordinary general meeting (EGM) to be convened.
The proposed business combination with the technology-driven live social entertainment platform confirms The Edge Singapore's previous report that VTAC was eyeing a "new media" company, as per sources familiar with the matter.
Under the SPA, VTAC will acquire 17LIVE’s shares for $925.1 million. This will be satisfied via the allotment and issuance of up to 160.6 million new shares in the company at the issue price of $5 per share. VTAC will also issue up to 24.4 million new shares in the company at the issue price should certain financial targets be satisfied. The respective earnout vesting dates are April 30, 2024 and Aug 30, 2024.
The earnout framework is meant to provide an incentive to the earnout shareholders to retain the consideration shares they received at the completion of the SPA. The earnout shareholders are a group of shareholders with a relatively substantial stake in the enlarged group.
In addition, VTAC says it intends to adopt an executive incentive scheme where new shares will be allotted and issued to certain entitled employees of 17LIVE subject to the financial targets achieved. It will also adopt a “special bonus scheme” to give VTAC’s existing shareholders 0.1 new shares in 17LIVE Inc. PIPE investors (or institutional and, or accredited investors) will also be given 0.1 new shares in the new company for every share subscribed.
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To minimise dilution, 17LIVE Inc.’s sponsor will enter into a deed of waiver where it will waive its right to receive a significant portion of the promoted shares in the company to be allotted and issued to Vertex Co-Investment Fund Pte. Ltd. VTAC says it also intends to adopt a share incentive scheme to issue new shares to the employees to the enlarged group. VTAC will also be raising funds from institutional and, or accredited investors by way of private placement (PIPE financing).
Depending on the amount of redemption by VTAC’s existing shareholders, the proposed business combination will value the enlarged group at a pro forma equity value of between $999.1 million to $1.16 billion. The amount comprises the purchase consideration, the cash in VTAC’s escrow account of between $60 million to $208 million, proceeds from the PIPE financing of $10 million and the special bonus scheme amount of between $4 million to $18.8 million.
VTAC was the first special purpose acquisition company to file its prospectus on the SGX. 17LIVE, which used to be known as M17 Entertainment before October 2020, is the operator of the largest live-streaming platform in Japan and Taiwan.
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For the 1HFY2023, 17LIVE had an average monthly average user (MAU) rate of around 550,000 with an average daily view duration per daily active user of approximately 93 minutes. It also reported a spend rate of 16.1% on a monthly average basis.
Growth companies' valuations are based on future earnings. Nonetheless, revenue in FY2022, for the 12 months to Dec 31, 2022, was US$363.7 million ($497.8 million), -27% y-o-y. The company reported a net loss of US$51 million for FY2022 due largely to revaluation adjustments on financial liabilities. The company's adjusted ebitda for FY2022 was US$15.8 million while its adjusted profit stood at US$4.9 million. Its operating cash flow was a negative US$10.5 million.
As at Dec 31, 2022, equity was a negative US$183.2 million and net assets a negative US$215.6 million, although a cash infusion from the de-spac process should solve the negative equity issue. After the de-Spac, 17LIVE's NTA per share, which was a negative US$1.41 per share turned positive. If no shareholders redeem their shares and cash out, NTA will be US$0.71; if there is a maximum redemption, NTA falls to US$0.24 per share.
On the earnings front, the net loss of US$51 million turns into a net profit of US$9 million with no redemption, and US$5.5 million with redemption, translating into an EPS (earnings per share) of US$0.04 and US$0.03 respectively.
Credit: SGX
