VTAC to raise S$3 million from Pipe investors on successful business combination

Vertex : VT1 0% Technology Acquisition Corporation : VT1 0% (VTAC) on Tuesday (Nov 21) said it will issue 600,000 new shares at S$5 apiece to private investment in public equity (Pipe) investors to raise some S$3 million in gross proceeds.

The move is subject to the completion of its proposed business combination with live-streaming operator 17Live, the special purpose acquisition company (Spac) said.

The S$3 million raised is less than earlier illustrations for S$10 million in Pipe financing, when the deal with 17Live was first announced.

Spacs typically raise a Pipe round during their business combinations for additional capital, which could also be useful if initial public offering (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 currently has S$208 million in its escrow account, which was raised during its IPO in 2022.

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The blank cheque company said earlier this month that it had drawn down S$10.4 million in interest earned from the funds in the escrow account to cover costs and other expenses.

Apart from S$60 million, which was invested by the sponsor and another Temasek-related entity Venezio, the amount in the escrow account can be redeemed by investors who do not wish to stay invested in 17Live.

Assuming no redemption, the gross proceeds due to the enlarged group from the escrow account and the Pipe issuance would be S$211 million.

If there were maximum redemption, the gross proceeds would fall to just S$63 million.

Phillip Securities Research on Monday (Nov 20) recommended shareholders to fully redeem their shares at the redemption price range of S$5 to S$5.02.

The research house – which was appointed by the Securities Investors Association (Singapore) or Sias to provide independent research – noted that revenue for 17Live has been declining since 2021, dragged by falling active users and weaker average spending.

It added that financial targets for the issuance of earnout shares include earnings before interest depreciation and amortisation declining an estimated 14 per cent on year in the second half of 2023, and total revenue declining 12 per cent on year in FY23.

Under SGX listing rules, mainboard companies are required to have at least 500 public shareholders.

In response to BT queries on whether any waivers may be granted if a Spac faces substantial redemptions, an SGX Group spokesperson noted that the float of the resulting issuer would be based on non-redeeming shareholders, 17Live shareholders as well as restricted share units (RSU) holders.

VTAC had 1,071 shareholders based on its annual report in March, while 17Live had 846 employees as at Jun 30, although not all of these are recipients of RSUs.

“As disclosed in VTAC’s circular, the company will be monitoring the level of redemptions and will announce the total number of redeeming shares at the EGM,” the spokesperson added.

The Pipe issue price of S$5 per share – similar to the IPO price – represents a 1.2 per cent premium to VTAC’s volume weighted average price of S$4.9394 per share for trades done on Monday.

Under its special bonus scheme, 0.1 new VTAC share will also be issued to Pipe investors for every base Pipe share subscribed for, upon the Spac’s completion of its proposed business combination with 17Live. Non-redeeming shareholders of VTAC would also be a part of the special bonus scheme, and receive the special bonus shares.

VTAC has engaged DBS and UBS Singapore as joint placement agents. As the Pipe placement is not underwritten, no prospectus or offer information statement will be issued by the company or lodged with the Monetary Authority of Singapore.

Shares of VTAC were trading at S$4.94 as at 3.24 pm on Tuesday, down 0.6 per cent from the previous close.