Taiwan-based M17 Entertainment on Friday decided to delay its debut on the New York Stock Exchange after raising less than half of its $115-million IPO target, further highlighting investors’ cautious stance when it comes to live streaming companies going public.
The live streaming operator, which counts Infinity Venture Partners, Golden Summit Capital, KTB Ventures, Vertex Ventures, Majuven, and Yahoo Japan among its shareholders, had announced that its IPO roadshow had raised a mere $60.1 million, lower than its original target of $115 million.
M17 Entertainment, the parent company of Singapore’s dating and networking app Paktor, has seen tremendous revenue growth since 2016. In the first three months of the year, the company netted $37.9 million, up from $1.17 in the same period last year. For the entire 2017, net revenue was $79.5 million.
So what could have spooked investors and turned them off M17’s listing?
A close scrutiny of the company’s amended F-1 statement could explain why M17 Entertainment failed to attract investors. The company’s operating loss reached $24.8 million in the first three months of the year, from $13.9 million in the December quarter.
The company’s $31.4 million cash and cash equivalents as of March 31 also indicate that it has limited resources to continue operations in the absence of a strong IPO.
And while its average monthly active users increased by 100,000 users to 1.7 million in the first quarter of this year from the previous quarter, the number of its live streaming active users per month stagnated to just 1 million in the six months ending March 31.
In its SEC filing last month, M17 Entertainment admitted that the company’s future revenue growth will depend on, among other factors, the popularity of live streaming applications and its ability to attract new users.
It added that the market for live video streaming is relatively new, highly dynamic, and may not develop as expected.
“If the market for our platform does not develop as we expect or if we fail to address the needs of this dynamic market, our business will be harmed,” the company said, further highlighting investors’ concern that the sustainability of this kind of business could be tough.
M17 also admits that it may continue to incur losses in the near future due to its continued investments in technologies, research and development, and continued sales and marketing initiatives.
Wall Street investors have become jittery when it comes to investing in live streaming and online gaming companies, having apparently learned their lessons following Zynga’s listing in 2011.
Zynga began trading on NASDAQ on December 16, 2011 at $10 per share but closed down 5 per cent on its first day. The stock reached its peak at $14.50 a share in March 2012 but has since then performed poorly.
At the end of Friday’s trading, Zynga was trading at $4.38 a share, less than half of its original price, as the popularity of Facebook games continues to dwindle.
A number of live streaming companies, mostly from China, have recently announced going public to attract more money but M17 Entertainment’s listing performance could very well give these companies an idea on how investors will likely receive them.
Chinese e-sports video platform Huya Broadcasting is seeking to raise up to $165 million by offering 15 million ADS at a price of $10 to $12, according to its SEC filing.
Another Chinese live-streaming platform, Inke, is considering a listing on the Hong Kong bourse this year to raise $300 million. Founded in 2015, Inke had more than 16 million monthly active users as of January last year, becoming one of the mainland’s popular live video streaming apps.
Last week, Wuhan Douyu Network Technology, a Tencent-backed live-streaming games platform, was reported to have planned an IPO in Hong Kong to raise up to $700 million. Tencent’s $630 million investment in March valued the company at over $2.4 billion.