Israeli Iron Source announced a $ 2.3 billion fundraiser - shareholders will receive $ 1.5 billion

Iron Source has announced a $ 2.3 billion fundraiser. The raising represents a value of $ 11.1 billion for the company. Of that amount, the company's shareholders will receive $ 1.5 billion. About 50% of the shares are with the company's founders, about 40% with the company's investors and about 10% with the employees.
Iron Source merges with Thoma Bravo's Spock Company, a private equity fund that, among other things, acquired the Israeli-American Impreva. As part of the merger, $ 1.3 billion was raised in PIPE, a private investment in a public company, and the rest comes from the Spock funds. This is the second merger in a week that reflects an Israeli company worth more than $ 10 billion, after Ituru.
Iron Source is one of the largest independent Internet companies in Israel. The company employs 850 people, and has been considered profitable for many years. A year and a half ago, it was valued at $ 1.7 billion, as part of a deal in which the private equity fund CVC bought about 25% of the company's shares for $ 450 million.
The company operates in the field of mobile advertising, mainly in the field of games, which accelerated during the Corona period. Accordingly, Iron Source's revenue also soared and revenues totaled $ 332 million, a sharp increase of 83% compared to its 2019 revenues. The growth rate accelerated as the year progressed, and the company reached revenue of more than $ 100 million in the last quarter, with growth of 107% compared to the corresponding quarter of 2019. However, the company expects that this year and next the growth rate will be 37% each. From the years. The company did not disclose what the growth rate was before the corona, in 2019 or earlier.
Adjusted EBITDA (profit before tax, interest, depreciation and amortization, as well as share-based compensation) amounted to $ 104 million, 31% of revenue. In 2019, adjusted EBITDA totaled $ 74 million, so it accounted for 41% of total revenue. The company expects adjusted EBITDA to be $ 130 million (29% of revenue) this year, while setting itself the goal of returning to 40% of revenue in the long run.
Behind the rapid growth and decline in profitability in the past year is a sharp increase in marketing and sales expenses, of 252% compared to 2019. These expenses amounted to $ 114 million - 34% of revenues, double than in 2019. These expenses are non-GAAP. The company has 291 customers who generate revenues above $ 100,000 and are responsible for 94% of its revenues.
Iron Source has been debating whether to make a regular IPO or merge with Spock. At first, the company decided to go ahead with the IPO, but they changed their minds after connecting them to Orlando Bravo, one of the founders of the foundation. "We received inquiries from every Spack you can think of," Omar Kaplan, co-founder and vice president of the company, told TheMarker. Between in the conduct of a public company. We felt we had found very good partners along the way. "
Iron Source was established in 2010, and the company consists of a merger of several companies created by eight founders - including the CEO, Tomer Bar-Ze'ev. $ 312 million, while they received an additional $ 450 million from CVC. The company also invests a disruptive fund of Tal Barnuach, Leumi Partners, Saban Ventures and Clal Industries.
The company is currently focused on the mobile field, mainly gaming apps. The company has created a network and technology for targeted advertising in tens of thousands of applications. The developers are embedding its technology (SDK), and using it to incorporate targeted advertisements in their games. Alternatively, they can advertise themselves on the network of apps that work with the company.
The advertising itself is richer than banners, and allows, for example, a short game experience or an interactive video combination. Iron Source's platform is embedded in 87 of the top 100 games in the world. The platform consists of two product packages - Sonic and Aura. The first supports app developers during the launch, revenue generation and growth of the apps and games. The Aura package enables mobile operators to enrich the user experience with mobile devices by creating new touchpoints between the providers and the user, which convey relevant content to users throughout the life of the device.
The focus in the mobile field was created after in 2019 it decided to split the desktop activity out of it and establish the TypeA company. Iron Source shareholders received equal shares in the new company. As part of this activity, the company does similar activity to applications only in PC software. The company did not want to comment on TypeA performance, but it is not inconceivable that behind the split was the desire to improve the company's growth rate and profitability rate, before they stand the test of the public capital market.
Spock companies are inactive companies that raise capital through an IPO, with the aim of merging with private companies. Such a merger is an alternative to an IPO, and it provides those private companies with certainty about value and also shortens processes for them. The tide in the capital market and the positive sentiment towards high-tech companies aroused the IPO market, causing a lot of money to flow to Spock companies.
Thus, in the first two and a half months of 2021, 270 companies were raised that raised $ 87 billion - more than in all of 2020. By comparison, in 2019, Spock companies raised only $ 13.6 billion. Every Spock company has two years to find a company to merge with, but the high sums create competition for the private companies and bounce their value.