Three months after a plan to merge with Outbrain unraveled, the Israeli online content-recommendation company Taboola is now weighing a Wall Street listing.
Taboola, whose deal with Outbrain was dubbed merger of the year before it fell apart, is mulling either a traditional initial public offering or a merger with a special purpose acquisition company, or SPAC, a publicly listed shell company created to merge with an existing business and enable that latter to go public without an IPO.
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“There’s no company with revenues of $100 million that’s not considering going public, especially in today’s market,” a source close to Taboola told TheMarker.
Taboola is a player in a business segment called “native display” that integrates advertising with editorial content. Its recommendations are a familiar feature at the bottom of online stories tagged as “from the web” or “you may be interested.” The company has created real competition against Google and Facebook and has signed up many of the world’s major publishers as customers.
Taboola’s business model is to split profits with publishers, who for the most part get a 60% cut. In the case of the biggest publishers, the company will typically guarantee revenues in exchange for getting content-recommendation exclusivity.
Taboola is profitable on an operating basis and generates revenues of around $150 million a year (after sharing profits with publishers).
Adam Singolda, its founder and CEO, said several months ago that the past year had been a banner one, despite the coronavirus pandemic – better than the past three years combined.
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Taboola's weighing going public through the SPAC route reflects the fact that the ad-tech industry has earned a reputation among investors over the last few years as very risky. Many companies have gone under since the start of the decade. Taboola was founded in 2007.
Listing through an SPAC takes less time than via an IPO – about four to five months versus six to eight months. While a company listing via an SPAC has to provide the investing public with business data, the standards are less onerous than the prospectus required before an IPO. All told, the process, which also doesn’t require a roadshow for potential investors, is not only faster but less expensive for the company.
But the main reason to list via an SPAC, bankers say, is that the company is guaranteed a price for its shares, thereby enabling existing investors to know what they will be getting and how much their holdings will be diluted when they take their company public.
In an interview with TheMarker in April 2019, Singolda was asked whether there were large companies out there ready to acquire Taboola at a time when tech giants are under fire from regulators and the public and companies were hesitant to consider merger deals.
His response was: “Google and Facebook have their own problems, and I’m not sure they want to enter our field. I also don’t know who would buy a company as large as Taboola. At this pace we’ll be worth billions and we’ll be bigger than Twitter (a company valued at the time at $30 billion). Taboola deserves to be a public company like Wix. It’s part of a new generation of Israeli companies that can live forever, and I hope to be part of it.”
This year has been a record one for SPACs. Some 230 companies have listed for trading through them, four times the 2019 level and after years of single-digit deals. All told, SPACs have raised $77.2 billion this year. Last week, the Israeli company Innoviz, which develops sensors for self-driving cars, announced it was merging with an SPAC to create a company valued at $1.4 billion.
The IPO market began heating up several months ago amid growing optimism about the prospects of high-tech companies in the post-coronavirus era. Two Israeli companies – JFrog and Lemonade – have gone public in recent months.