However, investors were seemingly less than enthusiastic about the 7.5 mln ADS (Each ADS = 8 shares) deal as it priced at $8, below the $10-$12 expected range, to raise total gross proceeds of $60 mln. The lead underwriters on the IPO were also solid, including Citigroup and Deutsche Bank. The stock is set to open later this morning on the NYSE. With the weak pricing, perhaps investors will look at it as an opportunity to pick up the stock at a discount.
YQ operates the largest live streaming platform in developed Asia with a market share of 19.2% in 1Q18. Its home market is Taiwan, where it represented 38.6% of the live streaming market -- more than double that of its closest competitor. Its live streaming platform is called "17 Media", which it launched in Taiwan in July 2015.
Nearly 80% of the content streamed is from contracted artists, as well as from online-to-offline events and competitions. Additionally, YQ has created its own music videos, TV programs, and variety shows. Its live streaming revenues have historically accounted for the large majority of its revenues, including 90.1% of our total net revenues in the three months ended March 31, 2018.
As of March 31, 2018, its streaming platform had 33.3 mln registered users, up from 32.4 mln at the end of 2017. There's quite a difference, though, between registered users and average monthly active users, which was significantly lower at 1.0 mln in the three months ended March 31, 2018.
YQ also operates Paktor, launched in Signapore in 2013, and Goodnight, which are dating applications. The total number of registered users on its dating applications grew to 14.6 mln as of March 31, 2018 from 13.9 mln and 11.0 mln as of December 31, 2017 and 2016, respectively. The company is still in the process of integrating its live streaming platform into its dating applications.
For the three months ended March 31, 2018, net revenue was $37.9 mln, up sharply from $11.8 mln in pro forma net revenue in the year ago period. This was mainly driven by a significant increase in live streaming revenue (+223%), in addition to higher dating service revenue (+145%).
Cost of revenue, however, also sky-rocketed higher, up 156% to $24.8 mln. Cost of revenue consists primarily of revenue sharing fees and live streaming costs, channel costs, and server and bandwidth costs. The positive news is that as a percentage of revenue, Cost of revenue declined to 72.2% from 90.9% in the same period in 2017. Still, cost of revenue is taking a large chunk out of the top-line, making it very difficult to operate on a profitable basis.
Gross margin improved to 27.8% from 9.1% on a pro forma consolidated basis in the year ago period. Total operating expenses surged by 257% to $35.4 mln, driven by a surge in selling expenses and SG&A costs due to the expansion of its workforce.
As a result of the above, YQ posted an operating loss of $24.8 mln for the three months that ended on March 31, 2018.