Triller and AGBA Plan $4B Merger + Role of TikTok Ban

Welcome to RockWater Roundup! Analysis to make you a better investor and operator in all things media, agencies, and creator economy.

Hi readers,

Today we discuss Triller and AGBA’s reverse merger, Triller’s controversial history, POV on real VS company-reported valuation, and why a social video platform and financial services plan to combine (hint: it’s financial engineering).

Other quick hits:

• I was in LA yesterday for the Creators in Fashion 2024 Spring Fashion Show. Always good to see creator-led businesses doing new takes on traditional industry exhibitions. Congrats to Style Theory, Theorist Media, Lunar X, Long Haul Mgmt, et al who put it together and gave us the invite.
• We just locked the venue for our second annual “Night Before Vidcon” party with James Creech. Invites for the June 25th event will go out soon. Sign up here to be added to invite list. Note that this will be a ticketed, premium event with open bar!
• Our team is seeing a large uptick in companies exploring strategic options like M&A and fundraising. Particularly for ad and IM agencies, social channels, and digital publishers. DM me if need help on valuations, diagnostics to assess buyer attractiveness and growth strategy, or sales process planning.

Onward,

Chris, Founder of RockWater

Triller and AGBA Plan $4B Merger + Role of TikTok Ban

The TikTok ban is jet fuel for $4B Triller / AGBA reverse merger.

But this is financial engineering to salvage 2 struggling companies.

Retail investors, be wary!

Let’s break it down…

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??TARGET: Triller

• “AI-powered” music-focused social video platform
• Founded 2015 by Bobby Sarnevesht and Ryan Kavanagh (Hollywood financier)
• Partnership with 7digital – has access to catalogs of Sony Music, UMG, WMG, Merlin Network for indies
• Controlling stake acquired by Kavanaugh’s Proxima Media for $28M in 2019
• Biz model = rev share, ticket sales / PPV, subscriptions, merch, advertising, platform fees
• Raised $218M+ and TBD debt between 2016 to 2022
• 200 est employees

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??PERFORMANCE HIGHLIGHTS

• 2.2M creators
• 450M+ consumer accounts
• Went from 1M to 30M users in India during 2020 TikTok ban
• 2023 revenue of $45M, down from $54M in 2022
• $104M loss for Q3 YTD
• $378M in total debt / liabilities vs $6M current assets for Q3 YTD
• $1M cash & equivalents per recent SEC filing?

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??OWNED ASSETS (often via M&A)

• Triller Sports – Bare-Knuckle Fighting Championship league
• Amplify.ai – mktg solution that connects brands w/ customers across social platforms
• Julius – software that enables IM campaigns
• Thuzio – B2B influencer and experiential events planner
• FITE – global streaming service

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??CONTROVERSIAL HISTORY

• 2022 Sony sued for unauthorized music use, settled Aug 2023
• 2023 sued by UMG for same reason?
• Owes music rightsholders $23.6M in unpaid fees
• 2022 called off $5B reverse merger with video ad platform SeaChange
• 2022 missed payment to Verzuz owners in M&A deal – purchase not completed
• Filed for NASDAQ IPO in Aug 2023 and Jan 2024, both failed
• Has reputation for inflating users and usage: claims of 100M users and 550M app downloads disputed by insiders and analytics agencies

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??TARGET: AGBA

• Tech-driven wealth mgmt and financial services
• 4 biz lines: Platform, Distribution, Healthcare, Fintech?
• Founded 1993
• Focuses on the Guangdong-Hong Kong-Macao Greater Bay Area (GBA)
• Publicly listed on NASDAQ, holding co registered in BVI, primarily operates in HK?
• Biz model: interest income, commissions, asset mgmt fees
• 176 est employees

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??PERFORMANCE HIGHLIGHTS

• 400k individual and corp customers
• Stock fell 80% between Oct and Dec 2022, has traded for under $1 for past 8 months
• $140M market cap, $19M of cash ($17M is restricted), $18M debt (incl $7M of borrowings)
• $54M of 2023 revenue, up 74% YoY
• $43M loss for 2023

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??DEAL DETAILS

• All stock deal, AGBA acquiring Triller in reverse merger
• AGBA will become Delaware corp (moving from HK) that wholly owns Triller
• New combined AGBA will be 80% owned by current Triller stockholders and RSU holders
• Current AGBA shareholders will own 20% of new combined co
• Approved by both co boards, now subject to regulatory and stockholder approvals
• Expected to close in late May

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??DEAL VALUATION

• Values Triller at $3.2B and AGBA at $800M, for a total of $4B
• …BUT seeking alpha estimates 509M FD shares outstanding post merger, so as of 4.25 AM stock price of $2.06, implies Triller’s real valuation is $1.05B
• ….and seeking alpha also highlights that based on TikTok’s $5B share repurchase at $268B valuation, or 17x revenue, that implies a $765M Triller valuation
• As of 4.23 AM stock trading at $2.40, up 500% from $0.40 the day pre merger announcement
• As of 4.25 AM (day after TikTok ban Senate vote), stock trading at $2.06, down 14%

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??POST-DEAL OPS

• Will focus on 4 key verticals: social video platform, influencer / artist / sports content creation, wealth mgmt / financial services, fintech investments
• Current AGBA Chairman Wing-Fai Ng will be Group CEO
• Triller co-founder Bobby Sarnevesht will be Triller CEO under new combined co
• Bob Diamond will be Group Chairman
• Triller will remain based in LA
• AGBA will maintain HK office

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??DEAL RATIONALE / SYNERGY

• Leverage Triller’s large social audience to drive traffic to AGBA’s financial services and create more engagement via live events, webinars, etc?
• Create personalized AGBA financial services via Triller user analytics and insights
• “access public capital markets and secure the liquidity needed for rapid growth”?

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??What else I find interesting…

This is a particular opportune time for the deal news → Triller is being aggressive when competitor TikTok faces US regulatory challenges, and seems to have made a smart timing bet, considering Biden officially signed the TikTok ban on Wed…less than one week after the deal was announced!

So it’s no surprise to learn that in the past, Triller leadership has called for Americans to delete TikTok and for the US gov to ban the app. BUT, now with Triller operating under a company based in Hong Kong, there could be similar suspicions considering China is increasingly exerting control of the HK territory.

Also worth noting that is an opportune time because TikTok has a licensing dispute with UMG, meaning TikTok’s access to the worlds’ largest music library is limited. With Triller having a meaningful music angle to its own social video platform, it’s another reason to be aggressive (though with all the label disputes I noted above, I’m actually unsure the exact commercial standing with Triller’s label partners).?

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??IMO, here’s the real angle on this deal..

It’s a cash-grab from less sophisticated retail investors…or those that want to make a meme-like speculative bet.

There isn’t solid industrial logic in how these businesses should combine. Instead, it’s 2 companies who have very challenged balance sheets, and that need access to more and new sources of capital. In other words, it’s financial engineering to tap into liquidity from the private markets during an election year where there’s political posturing and heightened tensions between the US and China.?

Some might consider this a stroke of genius in dealmaking, but I prefer to support “sturdy” businesses and M&A that’s good for our industries in the long term. Even if this deal goes through, the long term prospects for both companies feels very challenged considering Triller’s controversial history, poor track record of financial performance, and underlying business fundamentals.?

That’s not dealmaking I like to rally around for the long term interest of our creator x media economies. Investors will get burned, and data points like this make future deals and fundraising more challenging.?

I like this ending takeaway line from seeking alpha’s analysis offers good POV for how investors should look at this deal → “bullish with a lottery ticket-sized long position. No price target based on fundamentals, but the sky is the limit on meme-like speculation”

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??To that end…

As of April 22 morning, Halper Sadeh LLC, an investor rights law firm, is investigating whether the merger of AGBA Group Holding Limited (NASDAQ: AGBA) and Triller Corp. is fair to AGBA shareholders. Very curious where this nets out.

Alright, would love to write more, but I got to get on the road. DM me with any other deal POV or feedback you have…I’m loving the inbounds I’m getting on my recent analyses on the $13B Endeavor buyout and the $100M Dude Perfect investment.?

I'm the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.?

DM me on LinkedIn or email me chris @ wearerockwater dot com