17Live’s precipitous share price fall may set back Singapore’s tech listing ambitions

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 – two years after the special purpose acquisition company (Spac) framework was launched in Singapore – brought to the market a “new economy” 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’s initial public offering (IPO).

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

But pushing ahead with the listing – despite signs that the deal would not be well-received – could have put a dent in Singapore’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 “the listing destination of choice for local and global market leaders”, 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 – which are favoured by entrepreneurs – 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’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’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’s performance isn’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’ 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’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’t help but wonder whether liquidation would have been better for both VTAC’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 – Vertex Co-Investment Fund (Vertex SPV) and Venezio Investment – 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.