Media group Yeah1 will sell its entire stake in the US-based ScaleLab LLC following an incident with YouTube.
The move was to “protect the investment capital and maximise the interests of investors,” Yeah1 said in its statement sent to the Ho Chi Minh Stock Exchange (HoSE) late Friday.
Yeah1 is listing nearly 31.28 million shares on HoSE with the code YEG. The company shares hit the daily declining limit of 7 per cent in all five trading sessions of last week to plummet a total of 30.4 per cent, ending the week at VND170,600 (US$7.32) per share.
After last week, Yeah1 has lost nearly VND2.33 trillion (roughly $100 million) in its market value.
The fall of Yeah1 shares started last Monday after YouTube said it would terminate its Content Hosting Agreement (CHSA) with subsidiaries and associates of Yeah1 at the end of this month, including ScaleLab LLC and Thailand-based SpringMe Ptd Ltd.
In a statement sent to Yeah1, YouTube said SpringMe, in which Yeah1 has nearly 17 per cent stake, had violated YouTube policies in selecting and managing channels and videos.
Therefore, the statement said, YouTube had to terminate its entire agreement with Yeah1’s subsidiaries and associates that are running YouTube Adsense-based business activities.
CHSA is considered the licence for those media companies to make earnings from third-party businesses that run ads on the channels.
According to some securities firms, if Yeah1 is unable to reach an agreement with YouTube to resolve the issue, ScaleLab and SpringMe will no longer be allowed to manage third-party advertisements.
Therefore, Yeah1 will have to deduct the third-party income from its financial statement, particularly ScaleLab as most of the US-based firm’s revenue comes from managing third-party advertisements.
In addition, Yeah1 may have to suffer a $12 million loss for making investment in ScaleLab, which will require the Vietnamese firm to make a provision out of its revenue this year for the investment.
Thus, the decision to split with ScaleLab may indicate Yeah1’s failure to reach the best agreement with YouTube to resolve the problem.
After the incident and the sharp decline of Yeah1 shares, its management board registered to buy 700,000 shares on the market to boost the company share price.
In 2018, Yeah1 recorded a total revenue of VND1.66 trillion, up 97 per cent year on year. Its post-tax profit gained nearly 120 per cent year on year to VND180 billion.
The YouTube digital business and digital publication divisions recorded a large yearly earnings growth of 93 per cent. The two divisions contributed 55.6 per cent and 88.6 per cent of revenue and post-tax profit for Yeah1 in 2018.
Yeah1 bought ScaleLab for $12 million in early January 2019. In addition, Yeah1 will pay former owners of ScaleLab extra $8 million depending on the firm’s performance in the future.
In 2017, ScaleLab earned $27.3 million in revenue and its 2018 figure is expected to rise 15-20 per cent year on year. Its revenue from 2019 is forecast to increase 20-25 per cent per annum. — VNS