Israeli firm Taboola revealed in a U.S. Securities and Exchange Commission filing over the weekend that it and other companies in the digital advertising industry are under investigation for antitrust violations by the U.S. Department of Justice.
The criminal investigations involves hiring practices in the industry, which focuses on the recommendations the company makes for other online stories to read.
Taboola wrote in its F-4 filing with the SEC, before the company’s planned merger with ION, a SPAC company, that it does not believe it has violated the law.
Taboola only found out about the investigation last week, a few months after the decision on the SPAC merger was made.
A SPAC is a listed shell company without operations that raises money from investors with the goal of merging with a private company and taking it public.
The merger with ION, a special purpose acquisition company, is valued at $2.6 billion. As part of the merger, $509 million will be invested in the firm – of which $100 million will go to existing shareholders.
ION is led by Jonathan Kolber, Gilad Shani, Avrom Gilbert and Anthony Reich.
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Taboola was founded in 2007 by Adam Singolda and it operates in the sector known as native display advertising – ads integrated into the content.
The firm has been able to provide real competition to internet giants such as Google and Facebook, and a few of the world’s largest content providers on the internet are customers. The company’s business model is to divide up revenues with its publishers, and Taboola’s figures show that the publishers’ shares of its revenues reach about 70 percent.
For Taboola, the merger process with a SPAC is faster than normal and allows it certainty in receiving a valuation. The reason is that SPACs have no need to try to convince many investors to invest in the company, only the SPAC managers who negotiate the conditions.
In the past, companies that merged with SPACs were struggling to have a regular IPO and had a negative image, but last year the number of SPACs soared as well as the amounts that they raised, making it a suitable alternative to a traditional IPO.
Haaretz has revealed in the past that Israeli antitrust investigators are also looking into ties between it and the Israeli news-site Ynet in central Israel. The antitrust authority looked into claims of price fixings between the two firms.
Its main competitor is another Israeli company, Outbrain, with which it was supposed to merge but the deal fell apart and Outbrain has since started its own steps toward a IPO. Last month it filed a confidential prospectus with the SEC. It is now known whether Outbrain is also included in the antitrust investigation.