M17 Leisure, a Taipei-based dwell streaming and courting app group, priced its IPO this morning on the NYSE and was anticipated to open buying and selling right this moment in keeping with their ultimate press launch. However with just a bit greater than two hours to go earlier than market closing, it’s nonetheless not buying and selling, and nobody appears to know why.
An interview I had scheduled with the CEO earlier this afternoon was canceled on the final minute, with the corporate’s consultant saying that M17 couldn’t remark since its shares weren’t but actively buying and selling, and thus the corporate stays below an SEC-mandated quiet interval.
M17 has had a rocky non-debut thus far. Initially concentrating on a fundraise of $115 million of American Depository Receipts (shares of international corporations listed domestically on the NYSE), the corporate concluded its roadshow elevating lower than half of its goal, for a ultimate funding of $60.1 million. The corporate priced its ADR shares at $eight every, with every ADR representing eight shares of the inventory’s Class A safety.
My colleague Jon Russell has lined the corporate’s speedy progress over the previous three years. It was fashioned from the merger of courting app firm Paktor and live-streaming enterprise 17 Media. Joseph Phua, who was CEO of Paktor, grew to become CEO of the joint M17 firm following the merger. Collectively, the 2 halves have raised tens of thousands and thousands in enterprise capital.
The corporate’s predominant product is a live-streaming product the place creators can construct their fan bases and types. Followers should purchase digital presents to ship to their favourite artists, and people factors are proving to be terribly profitable for the corporate. The corporate, in keeping with its amended F-1 assertion, has seen super income progress, netting $37.9 million of income within the first three months of this 12 months. The corporate has additionally been capable of appeal to extra live-streaming expertise, growing its contracted artists from 999 on the finish of December 2016 to 7,719 on the finish of March this 12 months.
That’s the place the excellent news ends for the corporate. Regardless of that income progress, working losses are torrential, with the corporate shedding $24.eight million within the first three months of this 12 months. The corporate in its assertion says that it has $31.four million in money and money equivalents, giving it restricted runway to proceed operations with no robust IPO debut.
Person progress has been largely stagnant. Lively month-to-month customers has elevated from 1.5 million to 1.7 million between March 31 of 2017 and 2018. What the corporate has succeeded in doing is monetizing these customers significantly better. The proportion of customers paying on the platform has greater than doubled over the identical time interval, and the worth of these customers has elevated greater than 40 % to $355 per person per 30 days.
The massive problem for M17 is income high quality. Stay streaming represents 91.four % of the corporate’s revenues, however these revenues are focused on a handful of “whales” who purchase a freakishly excessive variety of digital presents. The corporate’s high 10 customers signify 11.eight % of all revenues (that’s $447,220 per person within the first three months this 12 months!), and its high 500 customers accounted for nearly a majority of complete revenues. That focus on the demand aspect is simply as heavy on the availability aspect. M17’s high 100 artists accounted for greater than a 3rd of the corporate’s income.
That focus has improved over the previous few months, in keeping with the corporate’s submitting. However Wall Avenue buyers have realized after Zynga and different whale-based income fashions that the sustainability of those companies will be powerful.
Lastly, one complication for many buyers cautious of the growing use of dual-class inventory points is the governance of the corporate. Phua, the CEO, may have 56.three % of the voting rights of the corporate, and M17 will likely be a managed firm below NYSE guidelines in keeping with the corporate’s amended submitting. Class B shares vote at a 20:1 ratio with Class A share voting rights.
All of that is to say that whereas the corporate has had some dizzying progress in its income numbers over the previous 24 months, that success is moderated by some vital challenges in income focus that should be a high precedence for M17 going ahead. Why the corporate priced and hasn’t traded stays a thriller, and we’ve got reached out for extra feedback.