The team adds that VTAC’s shareholders should fully redeem their shares at the redemption price range of $5 to $5.02 per share.
The research team at PhillipCapital is recommending that Vertex Technology Acquisition Corp’s (VTAC) shareholders vote in favour of the 17LIVE acquisition. The team adds that VTAC’s shareholders should fully redeem their shares at the redemption price range of $5 to $5.02 per share.
Phillip Securities Research was appointed by the Securities Investors Association Singapore (SIAS) and received monetary compensation from the latter to provide independent research on VTAC’s de-SPAC.
VTAC is acquiring 17LIVE, a live streaming company, for $800.8 million through the issuance of 160.16 million new shares. The valuation may rise by another $122 million from the issuance of new (earnout) shares by August 2024.
The financial targets to issue these 24.4 million in new (earnout) shares include ebitda declining by an estimated 14% y-o-y in 2HFY2023 to US$9.6 million ($12.9 million) and total revenue declining by some 12% y-o-y to US$320 million in the FY2023.
That said, the team points out that 17LIVE’s revenue has been declining since FY2021. The figure has been dragged down by falling active users and weaker average spending. However, 17LIVE’s earnings for the 1HFY2023 improved with a net profit of US$9.4 million, which was achieved through cost-cutting efforts.
“Based on price to sales and ev/ebitda relative multiple of listed peers, we derive a fair value of 17LIVE between US$581 million to US$700 million. When we equally weigh the importance of sales and earnings plus balance sheet strength, our 17LIVE fair value is US$641 million,” the team writes.
Assuming that there is no redemption of shares, the team’s fair value of VTAC post-acquisition is at $5.08. Should the earnout shares be fully issued, the team’s fair value declines to $4.55.
“We believe the purchase cost of the shares issued to the vendors of 17LIVE Inc, promote shares and earnouts shares are significantly lower than the redemption price range. Based on our current fair value, we view the warrants as out of money and there is a risk it can expire at zero value,” says the team.
As at 11.15am, shares in Vertax SPAC are trading 1 cent lower or 0.2% down at $4.94.