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AGBA Group: Triller Merger Creates Significant Speculative Upside If TikTok Gets Banned In The U.S.
AGBAAGBA (AGBA) Seeking Alpha·2024-04-23 03:17

Merger Details and Valuation - AGBA Group Holding Limited (AGBA) announced a merger with Triller, transforming from a 0.40stockto0.40 stock to 1.25, with trading volume surging to over 100 million shares per day [1] - The merger is expected to close in May 2024, pending regulatory and shareholder approval, and will result in AGBA domesticating to the United States [1] - Triller will be issued 407 million shares of AGBA, including 313 million common shares, 35 million preferred shares, and 58 million restricted stock units [3] - AGBA claims a 4billionvaluationforthedeal,implyingasharepriceof4 billion valuation for the deal, implying a share price of 10.80, though this valuation is speculative and likely overstated [3] - Post-merger, AGBA is estimated to have approximately 509 million fully diluted shares outstanding, with Triller's valuation based on AGBA's 1.25sharepriceat1.25 share price at 635 million [3] Triller's Background and Challenges - Triller gained prominence in 2020 after India banned TikTok, with its user base spiking from 1 million to 30 million [2] - The app saw a surge in downloads in the U.S. during the TikTok ban threat under the Trump administration, but growth has since flatlined [2] - Triller has faced controversies, including lawsuits over missed payments to artists and allegations of inflating active user numbers [2] - The company has struggled to go public, attempting SPACs, direct listings, and IPOs before settling on a reverse merger with AGBA [2] Financial Performance and Risks - Triller reported 45millioninrevenuefor2023,a1645 million in revenue for 2023, a 16% decline from 53.5 million in 2022, while posting significant losses [4] - AGBA reported a 43millionlosson43 million loss on 54 million in revenue in 2023, with 18millionincashandnegativeworkingcapitalof18 million in cash and negative working capital of 12 million [4] - Triller's balance sheet as of September 2023 showed 6millionincurrentassetsagainst6 million in current assets against 378 million in total debt and liabilities, with 359millioninintangibleassets[4]Thecombinedentitywillrequiresignificantfinancing,estimatedat359 million in intangible assets [4] - The combined entity will require significant financing, estimated at 200 million in cash and 200millionindebttoequityconversion,toremainsolvent[4]MarketOpportunityandSpeculationTrillerispositionedasapotentialalternativetoTikTok,especiallyifTikTokisbannedintheU.S.,whichcoulddriveusergrowth[1][4]TikTokgenerated200 million in debt-to-equity conversion, to remain solvent [4] Market Opportunity and Speculation - Triller is positioned as a potential alternative to TikTok, especially if TikTok is banned in the U.S., which could drive user growth [1][4] - TikTok generated 16.1 billion in revenue in 2023, with a 67% YoY increase, and ByteDance's $268 billion valuation implies a 17x revenue multiple [4] - Triller could benefit from political and speculative hype, particularly during the U.S. election cycle, as TikTok's ban remains a hot topic [5][6] - The company has the potential to become a "meme stock," with significant upside driven by speculation rather than fundamentals [6] Conclusion - The merger presents a high-risk, high-reward opportunity, with significant potential for speculative gains but substantial risks of dilution and financial instability [6] - Triller's future growth depends on its ability to capitalize on TikTok's potential ban and regain user and revenue momentum [6]