M17’s ill-fated IPO: CEO reveals all

Year-on-year revenue growth of over 10x. Selling costs as a share of revenue halved and operating losses quartered in the span of 12 months. Throw in the biggest market share for livestreaming in Asia’s developed economies, and things were looking pretty rosy for social media startup M17 Entertainment in the run-up to its New York IPO in June last year.

But some media and market commentators were skeptical. While M17’s losses were down as a share of revenue, they were widening in real terms. User acquisition had begun to slow considerably, raising questions over M17’s growth prospects.

On June 7, 2018 – the day of M17’s IPO – trading of the company’s stock was halted with no explanation. It was the first time in the nearly 230-year history of the New York Stock Exchange that a company canceled its listing on the same day it was supposed to begin trading.

I felt, ‘Leave it three to five days and it’ll die off.’

The following week, a statement from M17 confirmed it had indefinitely suspended its listing due to unspecified “issues related to the settlement” of shares and would instead continue to operate on a “non-public offering model,” securing a US$35 million credit line from existing investors.

The only other communication from the company came from chairman Jeffrey Huang, who blasted underwriters Citibank and Deutsche Bank in a Facebook post which he later took down, without detailing what he felt the banks had done.

M17 has remained silent on the incident – until now.

CEO Joseph Phua sat down with Tech in Asia to tell the story of what went wrong a year ago and what he and his company have learned.

Selling the company story to investors

“I felt, ‘Leave it three to five days and it’ll die off,’” Phua says, explaining the reasoning behind M17’s radio silence at the time. But what he didn’t anticipate was “the fervor of the news cycle,” pointing out how the aborted IPO still dominates M17’s SEO rankings.

“I did promise the board that I would clear this up once I feel comfortable, and I figured this would be a good time for me to give my side of the story,” he notes.

It begins towards the end of 2017, just months after M17 had been formed through a merger of Paktor – the Singapore-based dating app that Phua had founded in 2013 – and Taiwanese livestreaming portal 17 Media.

Excited by the startup’s strong traction since the merger, several banks approached M17 pushing for a listing, according to Phua.

“It was a very attractive proposition; be it inexperience, naiveté, or just a beautiful view of the world, the valuations were actually very strong. You were looking at pitched valuations of possibly 10x of what you’d previously raised at. So, surely you’d think, ‘Yeah, this is a possibility.’”

Tight book

Ringing the bell

Pulling the plug

That Facebook post

Damage control

Picking up the pieces

Back on track

Looking back, looking forward