Why the SPAC Route Makes Sense for Triller  

Why the SPAC Route Makes Sense
Cheyne Gateley/VIP

Social video app Triller has been aiming to capitalize on TikTok’s woes. Triller has recruited top TikTok stars and even launched a campaign intended to go viral “for the occasion” of TikTok facing a U.S. ban.

Now Triller is reportedly looking to drum up funding that would help it expand even further. The company is holding discussions with special purpose acquisition companies (SPACs) that would take it public, Reuters reported on Sunday.

SPACs are essentially shell companies formed with the sole intention of raising money via an initial public offering and merging with or acquiring another company. Investors don’t even know what company the SPAC will acquire when they invest, meaning they essentially are betting on the business acumen of the SPAC founders.

The advantage to a company of being acquired by a SPAC is it allows for a quicker route to becoming public than a traditional IPO would, with less hassle and scrutiny. For example, the SPAC route means the acquired company still goes public without having to do a roadshow.

That may hold some value to Triller.

While it reported having 65 million active users in early August, questions continue to swirl surrounding Triller’s reach. Triller in late August threatened to sue a third-party app analytics firm that disputed its user-reach count.

Meanwhile, Business Insider earlier in October reported that Triller employees allege the company had previously inflated its user count by over five times (though Triller CEO Mike Lu said these employees were “disseminating inaccurate information”).

These incidents would likely be on potential investors’ minds that Triller might have to address more head-on during the roadshow process without the SPAC route. For example, some brands even want some assurances before they advertise on TikTok, a senior media buyer at a global media agency recently told Digiday.

But that’s not the only reason going public via SPAC might be appealing to Triller. Unlike in traditional IPOs, target companies are able to lock in the price of their stock with the SPAC sponsor as part of their agreement.

That would make a company like Triller less vulnerable to market uncertainty as TikTok remains in limbo in the U.S.

Still, the SPAC route is no certainty for Triller even as blank-check companies have particularly been trendy in 2020, including in the media sector.

There were 77 SPAC IPOs in Q3 2020, up from 27 in Q2 and just 18 in Q1, according to FactSet.

Part of the surge is due to the pandemic leaving companies vulnerable to or more open for acquisition, but there are signs that the SPAC craze could slow.

Some SPAC investors believe there is oversupply relative to the capital devoted to the sector, which deflated prices across the sector in August, according to Barron’s.

Perhaps that’s part of the reason why Triller is considering whether or not to raise additional funds via a deal with a SPAC or a private fundraising round led by UBS, according to Reuters.