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mm2 Asia to self-destruct or win big?

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In 2014, mm2 Asia debut in Singapore Catalist with minimal fanfare. But in 2017, the share price went on an unstoppable bull run when the share price increased 7 fold in value, creating immense wealth for shareholders. To top it off, it also got upgraded to the SGX Mainboard list, an impressive feat for a company that just got listed in Catalist in two years. For a penny stock, mm2 Asia is certainly a very interesting stock but in recent months, the share price got bombed out.

What on earth has happened? Is it the end of the party for mm2 Asia?

In my previous article, “The Outrageous Story of mm2 Asia“, I wrote that I would enter this counter at $0.35. On the basis of the current form, the share price of mm2 Asia seems likely to reach this price level soon. However, I have decided to stick to my strategy of not investing in a stock which IPO within 5 years. There are three reasons which I would like to share in this article.

mm2 Asia

Pre-IPO investors

Being a TV and film production company, mm2 Asia occupies a very niche area in Singapore stock market. As a content producer, I like mm2 Asia’s business model because this is an evergreen field that can never be made obsolete by technology. mm2 Asia also owns animation company, Vividthree Productions (which is going to IPO) and also event and concert company, UnUsuaL (which had been listed).

Through mmCineplexes, mm2 has its own cinema chain in Malaysia. And not to mention the $230 million acquisition of Cathay Cineplexes which was completed in May 2018.

When it got initially listed in Catalist, mm2 Asia had a group of pre-IPO investors, consisting of PAPOF (16.1 million shares), Wong Li Foon (880,000), Cornerstone Pictures Pte Ltd (1.6 million shares), Sng Siew Lin (1.92 million shares) and Hesheng Media Co., Ltd (1.92 million shares).

Unlike typical retail investors, pre-IPO investors got a placement of shares before the IPO hit the market. According to the prospectus, convertible notes were issued by mm2 Asia to the pre-IPO investors. On 20 November 2014, 100% of the principal amount were converted into 25,729,032 Conversion Shares. The Convertible Notes of all the pre-IPO investors were converted at a conversion price that is 62.5% of the Placement Price, with the exception of PAPOF whose Convertible Notes were converted at a conversion price that is 62% of the Placement Price.

The Placement Price, which was the IPO price, at that point of time was $0.25. Given that the pre-IPO investors [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: September 17, 2018 — 3:05 pm

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