(Reuters) -Short-video app Triller on Tuesday ended its $5 billion merger with video advertising software provider SeaChange International Inc and said it would pursue an initial public offering instead.

SeaChange shares plunged 40% to 41 cents.

Triller said it was responding to higher-than-expected demand for its convertible debt offering and as its shareholders prefer that the company go public through a direct listing.

"The current market demands clear and disciplined thinking. A Triller IPO is a cleaner transaction, allowing us greater control of our destiny," said Chief Executive Officer Mahi de Silva.

Triller is expected to be listed under the new ticker symbol "ILLR" by September.

The companies said they had mutually agreed to terminate the deal as it was "no longer possible to complete the merger prior to its termination date of June 30", adding they would not to seek an extension and that the termination was effective immediately.

In December, the two companies had inked a deal to take Triller public through a reverse merger with SeaChange.

M&A activity, especially SPAC deals, were among the hottest investment trends during the pandemic. However, they are losing investor attention due to regulatory scrutiny and market volatility.

(Reporting by Nivedita Balu in Bengaluru; Editing by Amy Caren Daniel)