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A Quick Peek At M17 Entertainment’s IPO Filing

Morning Report: Here is another streaming company IPO. Let’s take a look.

One great thing about the current IPO cycle is that there are more IPOs than before. One bad thing about the current IPO cycle is that we sometimes miss one. Such is the case with M17 Entertainment.

The Taiwan-based firm filed on May 11th of this year, indicating a potential $115 million raise and a complex corporate structure. However, we’ll skip the latter as it seems to be mostly immaterial given how the company intends to operate post-IPO.

So, what do you need to know about M17’s potential flotation? A few things:

  • The company claims to “operate the largest live streaming platform by revenue in developed Asia with a market share of 19.2% in the first quarter of 2018.” That business gives M17 33.3 million registered users as of the end of Q1’18, and 1.0 million “average monthly active users” in the same quarter.
  • So the huge majority of its registered users are inactive. The firm also operates a dating service in addition to its live streaming product.
  • M17’s revenue growth is impressive. In the first quarter of 2017, the company’s revenue came to $11.8 million. In the first quarter of 2018, that figure grew to $37.9 million.
  • However, the company’s gross margins aren’t wild by modern standards, generating just $1.1 million in gross profit in the first quarter of 2017, and $10.5 million in gross profit during the first quarter of 2018.
  • As you can expect, the firm lost buckets off those results, including $17.5 million in Q1’17 and $26.9 million in Q1’18.

That’s the high-level stuff. It gets slightly weird from here.

It appears that M17’s revenue generation is extremely concentrated. I can’t find another way to read the following passage. After stating in a preceding note that live streaming drives 91.4 percent of its revenue, M17 stated the following:

We have a large and growing base of users. However, only a limited number of users contribute a significant portion of our revenues. For example, our top 10, 100 and 500 users accounted for approximately 11.8%, 29.2% and 47.9% of our total revenues in the three months ended March 31, 2018, respectively, a decrease from 19.0%, 41.3% and 61.8% in the three months ended December 31, 2017.

So M17 is growing quickly with heavy, heavy losses off a subset of big-spending users. This company simply feels a bit too nascent to go public.

That’s up to investors, however. We’ll see. More if it prices.

iStockPhoto / loops7

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