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As filed with the Securities and Exchange Commission on May 20, 2021.
Registration No. 333-255684
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM F-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
TABOOLA.COM LTD.
(Exact name of registrant as specified in its charter)
State of Israel
7370
Not applicable
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
Taboola.com Ltd.
16 Madison Square West
7th Floor
New York, NY
10010
(212) 206-7633
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
TABOOLA, INC.
16 Madison Square West
7th Floor
New York, NY
10010
(212) 206-7633
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all correspondence to:
Marc D. Jaffe
Justin G. Hamill
Senet S. Bischoff
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022-4834
Tel: (212) 906-1200
Michael Kaplan
Lee Hochbaum
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Tel: (212) 450-4000
Shachar Hadar
Assaf Naveh
Ran Camchy
Meitar | Law Offices
16 Abba Hillel Silver Rd.
Ramat Gan 52506, Israel
Tel: (+972) (3) 610-3100
Joel Rubinstein
Robert Chung
Kristen Rohr
White & Case LLP
1221 Avenue of the Americas
New York, New York 10020-1095
Tel: (212) 819-8200
Aaron M. Lampert
Goldfarb Seligman & Co.
Ampa Tower
98 Yigal Alon Street
Tel Aviv 6789141, Israel
Tel: (+972) (3) 608-9999
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement and all other conditions to the proposed Business Combination described herein have been satisfied or waived.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Amount
to be
Registered(1)(6)
Proposed Maximum
Offering Price
per Security(2)
Proposed Maximum
Aggregate
Offering Price
Amount of
Registration Fee(3)
Ordinary shares, no par value per share(4)
32,343,750
$10.245
$331,361,718.80
$36,151.56
Ordinary shares underlying warrants(5)
12,350,000
$13.855
$171,109,250.00
$18,668.02
Total
 
 
$502,470,968.80
$54,819.58
(1)
The number of ordinary shares, no par value per share (“Taboola Ordinary Shares”), of Taboola.com Ltd. (“Taboola”) and the Taboola Ordinary Shares issuable upon the exercise of warrants to purchase Taboola Ordinary Shares (“Taboola Warrants”) being registered is based upon an estimate of the sum of (a) the maximum number of Class A ordinary shares (“Class A Ordinary Shares”) of ION Acquisition Corp. 1 Ltd. (“ION”) that will be outstanding immediately prior to the Business Combination (as defined herein) and exchanged for an equal number of Taboola Ordinary Shares (including the maximum number of Class B ordinary shares (“Class B Ordinary Shares” and, together with the Class A Ordinary shares, the “ION Ordinary Shares”) of ION that will be converted to Class A Ordinary Shares immediately prior to the Business Combination); and (b) the maximum number of Class A Ordinary Shares underlying each warrant of ION entitling the holder to purchase one Class A Ordinary Share per warrant at a price of $11.50 per share (“ION Warrants”) which will be assumed by Taboola and will become Taboola Warrants.
(2)
In accordance with Rule 457(f)(1) and Rule 457(c), as applicable, based on (i) in respect of Taboola Ordinary Shares issued to ION security holders, the average of the high ($10.30) and low ($10.19) prices of the Class A Ordinary Shares on the New York Stock Exchange (“NYSE”) on April 26, 2021 and (ii) in respect of Taboola Ordinary Shares underlying Taboola Warrants issued to ION security holders, the sum of (a) the average of the high ($2.46) and low ($2.25) prices for the ION Warrants on NYSE on April 26, 2021 and (b) $11.50, the exercise price of the ION Warrants, resulting in a combined maximum offering price per warrant of $13.855. The maximum number of Taboola Ordinary Shares issuable upon exercise of the Taboola Warrants are being simultaneously registered hereunder. Consistent with the response to Question 240.06 of the Securities Act Rules Compliance and Disclosure Interpretations, the registration fee with respect to the Taboola Warrants has been allocated to the underlying Taboola Ordinary Shares and those Taboola Ordinary Shares are included in the registration fee. The maximum number of Taboola Ordinary Shares issuable upon exercise of the Taboola Warrants are being simultaneously registered hereunder.
(3)
Calculated by multiplying the proposed maximum aggregate offering price by 0.0001091.
(4)
Represents Taboola Ordinary Shares issuable in exchange for outstanding ION Ordinary Shares upon the merger of Merger Sub with and into ION pursuant to the Business Combination.
(5)
Represents Taboola Ordinary Shares underlying Taboola Warrants.
(6)
Pursuant to Rule 416(a), there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this proxy statement/prospectus is not complete and may be changed. Taboola.com Ltd. may not sell these securities until the registration statement filed with the Securities and Exchange Commission, of which this proxy statement/prospectus is a part, is effective. This proxy statement/prospectus is neither an offer to sell these securities, nor a solicitation of an offer to buy these securities, in any state or jurisdiction where the offer or sale is not permitted. Any representation to the contrary is a criminal offense.
PRELIMINARY COPY—SUBJECT TO COMPLETION DATED MAY 20, 2021
PROXY STATEMENT/PROSPECTUS


PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
OF
ION ACQUISITION CORP. 1 LTD.

PROSPECTUS FOR UP TO 32,343,750 ORDINARY SHARES,
AND 12,350,000 ORDINARY SHARES UNDERLYING WARRANTS
OF
TABOOLA.COM LTD.
The board of directors of ION Acquisition Corp. 1 Ltd., a Cayman Islands exempted company (“ION”), has unanimously approved the agreement and plan of merger (“Merger Agreement”), dated as of January 25, 2021, by and among ION, Taboola.com Ltd., a company organized under the laws of the State of Israel (the “Company” or “Taboola”), and Toronto Sub Ltd., a Cayman Islands exempted company and wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into ION, with ION surviving the merger (the “Business Combination”). As a result of the Business Combination, and upon consummation of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Transactions”), ION will become a wholly owned subsidiary of Taboola, with the securityholders of ION becoming securityholders of Taboola.
Pursuant to the Merger Agreement, at the effective time of the Business Combination (the “Effective Time”), (a) each issued and outstanding unit of ION (an “ION Unit”), consisting of one Class A ordinary share of ION, par value $0.0001 per share, of ION (“Class A Ordinary Shares”) and one-fifth of one warrant of ION entitling the holder to purchase one Class A Ordinary Share per warrant at a price of $11.50 per share (“ION Warrants”), will be automatically separated and the holder thereof will be deemed to hold one Class A Ordinary Share and one-fifth of one ION Warrant, (b) each Class A Ordinary Share outstanding immediately prior to the Effective Time will be exchanged for one ordinary share no par value per share of Taboola (“Taboola Ordinary Shares”), (c) each Class B ordinary shares, par value $0.0001 per share, of ION (“Class B Ordinary Shares” and, together with Class A Ordinary Shares, “ION Ordinary Shares”), outstanding immediately prior to the Effective Time, will be exchanged for one Taboola Ordinary Share and (d) each ION Warrant outstanding immediately prior to the Effective Time, will be assumed by Taboola and will become a warrant of Taboola (“Taboola Warrants”).
Prior to the Effective Time, each outstanding Taboola convertible preferred share will be converted into Taboola Ordinary Shares in accordance with Taboola’s organizational documents and Taboola intends to effect a 1-for-2.7007 forward stock split to cause the value of the outstanding Taboola Ordinary Shares immediately prior to the Effective Time to equal $10.00 per share (the “ Stock Split ”).
Concurrently with and following the execution of the Merger Agreement, Taboola and certain accredited investors (“PIPE Investors”) entered into a series of subscription agreements (“Subscription Agreements”), providing for the purchase by the PIPE Investors at the Effective Time of an aggregate of 13,500,000 Taboola Ordinary Shares (“PIPE Shares”) at a price per share of $10.00 (assuming the Stock Split has been effected), for gross proceeds to Taboola of $135,000,000 (collectively, the “PIPE”). The closing of the PIPE is conditioned upon the consummation of the Transactions.
Concurrently with and following the execution of the Merger Agreement, Taboola and certain accredited investors (the “Secondary Investors”) entered into share purchase agreements with certain shareholders of Taboola (the “Secondary Share Purchase Agreements”) pursuant which the Secondary Investors committed to purchase Taboola Ordinary Shares from certain shareholders of Taboola, and, under certain circumstances, from Taboola, an aggregate of up to 15,120,000 Taboola Ordinary Shares (the “Secondary Shares”) at a price per share of $10.00 (assuming the Stock Split has been effected), for gross proceeds up to of $151,200,000 (the “Secondary Purchases”).
This proxy statement/prospectus covers the Taboola Ordinary Shares issuable to the securityholders of ION as described above. Accordingly, we are registering up to an aggregate of 32,343,750 Taboola Ordinary Shares and 12,350,000 Taboola Ordinary Shares issuable upon the exercise of the Taboola Warrants. We are not registering the Taboola Ordinary Shares held by or issuable to Taboola securityholders or the PIPE Investors.
Proposals to approve the Merger Agreement and the other matters discussed in this proxy statement/prospectus will be presented at the extraordinary general meeting of ION shareholders scheduled to be held on    , 2021, in virtual format.
Although Taboola is not currently a public reporting company, following the effectiveness of the registration statement of which this proxy statement/prospectus is a part and the closing of the Business Combination, Taboola will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Taboola intends to apply for listing of the Taboola Ordinary Shares and Taboola Warrants on the Nasdaq Global Market (“Nasdaq”) under the proposed symbols “TBLA” and “TBLAW,” respectively, to be effective at the consummation of the Business Combination. It is a condition of the consummation of the Transactions that the Taboola Ordinary Shares are approved for listing on Nasdaq (subject only to official notice of issuance thereof and round lot holder requirements). While trading on Nasdaq is expected to begin on the first business day following the date of completion of the Business Combination, there can be no assurance that Taboola’s securities will be listed on Nasdaq or that a viable and active trading market will develop. See “Risk Factors” beginning on page 17 for more information.
Taboola will also be a “foreign private issuer” as defined in the Exchange Act and will be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, Taboola’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, Taboola will not be required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
The accompanying proxy statement/prospectus provides ION shareholders with detailed information about the Business Combination and other matters to be considered at the extraordinary general meeting of ION. We encourage you to read the entire accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 17 of the accompanying proxy statement/prospectus.
None of the Securities and Exchange Commission, any state securities commission or the Israel Securities Authority has approved or disapproved of the securities to be issued in connection with the Business Combination, or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated    , 2021, and is first being mailed to ION shareholders on or about    , 2021.

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ION ACQUISITION CORP 1 LTD.
89 Medinat Hayehudim Street
Herzliya 4676672, Israel
NOTICE OF
EXTRAORDINARY GENERAL MEETING
TO BE HELD ON    , 2021
TO THE SHAREHOLDERS OF ION ACQUISITION CORP 1 LTD.
NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “meeting”) of ION Acquisition Corp 1 Ltd., a Cayman Islands exempted company (“ION”), will be held at    a.m. Eastern time, on    , 2021, at https://www.cstproxy.com/ionacquisitioncorp1/sm2021. In light of ongoing developments related to the coronavirus (COVID-19) pandemic, after careful consideration, ION has determined that the meeting will be a virtual meeting conducted via live webcast in order to facilitate shareholder attendance and participation while safeguarding the health and safety of our shareholders, directors and management team. For the purposes of Cayman Islands law and the amended and restated memorandum and articles of association of ION (the “ION Articles”), the physical location of the meeting shall be at the offices of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020. You or your proxyholder will be able to attend and vote at the meeting online by visiting https://www.cstproxy.com/ionacquisitioncorp1/sm2021 and using a control number assigned by Continental Stock Transfer & Trust Company, the transfer agent to ION. To register and receive access to the hybrid virtual meeting, registered shareholders and beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the attached proxy statement/prospectus of which this notice forms a part. You are cordially invited to attend the meeting, in order to consider and vote on proposals to:
(1)
Proposal No. 1 — The Business Combination Proposal — An Ordinary Resolution to approve, ratify and adopt the Merger Agreement, dated as of January 25, 2021 (as it may be amended and/or restated from time to time, the “Merger Agreement” and to which the form of Plan of Merger required by the Companies Act (as amended) of the Cayman Islands (the “Plan of Merger”) is appended) by and among ION, Taboola.com Ltd. (“Taboola”) and Toronto Sub Ltd. (“Merger Sub”), a copy of which is attached to the proxy statement as Annex A, and approve the transactions contemplated thereby (the “Business Combination”); and
(2)
Proposal No. 2 — The Merger Proposal — A Special Resolution to approve the Plan of Merger and to authorize the merger of Merger Sub with and into ION, with ION surviving the merger as a wholly owned subsidiary of Taboola, and the issuance of ordinary shares of Taboola to ION shareholders as merger consideration; and
(3)
Proposal No. 3 — The Share Capital Proposal — An Ordinary Resolution to approve the alteration of the authorized share capital of ION at the effective time of the Merger (upon its becoming a wholly owned subsidiary of Taboola); and
(4)
Proposal No. 4 — The Adjournment Proposal — An Ordinary Resolution to approve, if necessary, the adjournment of the meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Merger Proposal. This proposal will only be presented at the meeting if there are not sufficient votes to approve the Business Combination Proposal and the Merger Proposal.
These items of business and the full text of the resolutions to be voted upon are described in the attached proxy statement/prospectus, which we encourage you to read in its entirety before voting. Only holders of record of Class A ordinary shares, par value $0.0001 per share, of ION (“Class A Ordinary Shares”) at the close of business on       , 2021 are entitled to notice of the meeting and to vote at the meeting and any adjournments or postponements of the meeting.
After careful consideration, ION’s board of directors has determined that the Business Combination Proposal, the Merger Proposal and the Share Capital Proposal are fair to and in the best interests of ION and its shareholders and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Merger Proposal and “FOR” the Share Capital Proposal, and “FOR” the Adjournment Proposal, if presented.
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Consummation of the Business Combination is conditioned on the approval of the Business Combination Proposal and the Merger Proposal.
All ION shareholders are cordially invited to attend the meeting, which will be held virtually over the Internet at https://www.cstproxy.com/ionacquisitioncorp1/sm2021. To ensure your representation at the meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a shareholder of record of Class A Ordinary Shares, you may also cast your vote at the meeting. If your Class A Ordinary Shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your Class A Ordinary Shares or, if you wish to attend the meeting and vote, obtain a proxy from your broker or bank.
Your vote is important regardless of the number of Class A Ordinary Shares you own. Whether you plan to attend the meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the Class A Ordinary Shares you beneficially own are properly counted.
Thank you for your participation. We look forward to your continued support.
 
By Order of the Board of Directors
 
 
 
 
 
Jonathan Kolber
 
Chairman of the Board of Directors
     , 2021
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR CLASS A ORDINARY SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST (1) IF YOU HOLD YOUR CLASS A ORDINARY SHARES THROUGH UNITS, ELECT TO SEPARATE YOUR UNITS INTO THE UNDERLYING CLASS A ORDINARY SHARES AND WARRANTS PRIOR TO EXERCISING YOUR REDEMPTION RIGHTS WITH RESPECT TO THE CLASS A ORDINARY SHARES, AND (2) ELECT TO HAVE ION REDEEM YOUR CLASS A ORDINARY SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TRANSMIT YOUR CLASS A ORDINARY SHARES TO ION’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE VOTE AT THE MEETING. YOU MAY TENDER YOUR CLASS A ORDINARY SHARES BY EITHER DELIVERING YOUR CLASS A ORDINARY SHARE CERTIFICATES (IF ANY) AND OTHER REDEMPTION FORMS (AS APPLICABLE) TO THE TRANSFER AGENT OR BY DELIVERING YOUR CLASS A ORDINARY SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THOSE CLASS A ORDINARY SHARES YOU HAVE TENDERED FOR REDEMPTION WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE CLASS A ORDINARY SHARES IN “STREET NAME,” YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE CLASS A ORDINARY SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “EXTRAORDINARY GENERAL MEETING OF ION SHAREHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.
The attached proxy statement/prospectus is dated    , 2021 and is first being mailed to ION shareholders on or about    , 2021.
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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms a part of a registration statement on Form F-4 filed with the Securities and Exchange Commission, or SEC, by Taboola, constitutes a prospectus of Taboola under Section 5 of the Securities Act of 1933, as amended, or the Securities Act, with respect to the Taboola Ordinary Shares to be issued to ION shareholders in connection with the Business Combination, as well as the Taboola Ordinary Shares underlying the Taboola Warrants. This document also constitutes a proxy statement of ION under Section 14(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules promulgated thereunder, and a notice of meeting with respect to the extraordinary general meeting of ION shareholders to consider and vote upon, among other things, the proposals to adopt the Merger Agreement and to adjourn the meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to adopt the Merger Agreement.
This proxy statement/prospectus also constitutes a proxy statement of ION under Section 14(a) of the Securities Exchange Act, and the rules promulgated thereunder, and a notice of meeting with respect to the extraordinary general meeting of ION shareholders to consider and vote upon the proposals to adopt the Merger Agreement, approve the Business Combination and alteration of ION’s authorized share capital and to adjourn the meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to adopt the Merger Agreement.
Unless otherwise indicated or the context otherwise requires, all references in this proxy statement/prospectus to the terms “Taboola” and the “Company” refer to Taboola.com Ltd., together with its subsidiaries. All references in this proxy statement/prospectus to “ION” refer to ION Acquisition Corp. 1 Ltd.
INDUSTRY AND MARKET DATA
Unless otherwise indicated, information contained in this proxy statement/prospectus concerning Taboola’s industry, including Taboola’s general expectations and market position, market opportunity and market share, is based on information obtained from various independent publicly available sources and reports as well as management estimates. Taboola has not independently verified the accuracy or completeness of any third-party information. While Taboola believes that the market data, industry forecasts and similar information included in this proxy statement/prospectus are generally reliable, such information is inherently imprecise. In addition, assumptions and estimates of Taboola’s future performance and growth objectives and the future performance of its industry and the markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings “Risk Factors—Risks Related to Taboola’s Business and Our Industry,” “Cautionary Statement Regarding Forward-Looking Statements” and “Taboola’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/prospectus.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
ION, Merger Sub and Taboola and its subsidiaries own or have rights to trademarks, trade names and service marks that they use in connection with the operation of their businesses. In addition, their names, logos and website names and addresses are their trademarks or service marks. Other trademarks, trade names and service marks appearing in this proxy statement/prospectus are the property of their respective owners. Solely for convenience, in some cases, the trademarks, trade names and service marks referred to in this proxy statement/prospectus are listed without the applicable ®, and SM symbols, but they will assert, to the fullest extent under applicable law, their rights to these trademarks, trade names and service marks.
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SELECTED DEFINITIONS
In this proxy statement/prospectus, unless we indicate otherwise or the context requires, the following terms have the meanings set forth below.
“Board” means the board of directors of ION.
“Business Combination” means the merger pursuant to the Merger Agreement, whereby Merger Sub will merge with and into ION, with ION surviving the merger, and the other transactions contemplated by the Merger Agreement.
“Class A Ordinary Shares” means each Class A ordinary share of ION, par value $0.0001 per share.
“Class B Ordinary Shares” means each Class B ordinary share of ION, par value $0.0001 per share.
“Effective Time” means the effective time of the closing of the Business Combination.
“Founder Shares” means 6,468,750 Class B Ordinary Shares purchased by the Sponsors, directors and executive officers of ION for an aggregate of $25,000 (including the 718,750 Class B Ordinary Shares issued to the Founders in connection with the share capitalization effected on October 1, 2020), which immediately prior to the Effective Time will automatically convert into 6,468,750 Class A Ordinary Shares.
“Investors’ Rights Agreement” means the Amended and Restated Investors’ Rights Agreement, to be effective as of the Effective Time, pursuant to which each of the Sponsors, and certain of Taboola’s shareholders will be granted certain resale registration rights with respect to any Taboola Ordinary Shares or Taboola Warrants.
“ION” means ION Acquisition Corp. 1 Ltd., a Cayman Islands exempted company.
“ION Ordinary Shares” means Class A Ordinary Shares and Class B Ordinary Shares.
“ION Unit” means each issued and outstanding unit of ION, consisting of one Class A Ordinary Share and one-fifth of one ION Warrant.
“ION Warrants” means each warrant of ION entitling the holder to purchase one Class A Ordinary Shares per warrant at a price of $11.50 per share
“Merger Agreement” means the agreement and plan of merger, dated as of January 25, 2021, by and among ION, Taboola and Merger Sub.
“Merger Sub” means Toronto Sub Ltd., a Cayman Islands exempted company and wholly owned subsidiary of the Company.
“PIPE” means the entry by the PIPE Investors into the Subscription Agreements.
“PIPE Investment” means the commitment by the PIPE Investors to purchase an aggregate of 13,500,000 PIPE Shares from Taboola at a price per share of $10.00, for gross proceeds to Taboola of $135,000,000.
“PIPE Investors” means certain accredited investors that entered into the Subscription Agreements providing for the purchase of an aggregate of 13,500,000 PIPE Shares at a price per share of $10.00.
“PIPE Shares” means an aggregate of 13,500,000 Taboola Ordinary Shares to be purchased by the PIPE Investors pursuant to the Subscription Agreements at a price per share of $10.00.
“Secondary Investors” means certain accredited investors that entered into the Secondary Purchase Agreements providing for the purchase of an aggregate of up to 15,120,000 Secondary Shares at a price per share of $10.00.
“Secondary Purchase Agreements” means the purchase agreements entered into by the Secondary Investors providing for the purchase by the Secondary Investors at the Effective Time of an aggregate of up to 15,120,000 Secondary Shares at a price per share of $10.00.
“Secondary Purchases” means the commitment by the Secondary Investors to purchase Taboola Ordinary Shares from certain employees and shareholders of Taboola, and, under certain circumstances, from Taboola, in an aggregate of 15,120,000 Secondary Shares at a price per share of $10.00, for gross proceeds of $151,200,000.
“Secondary Shares” mean an aggregate of up to 15,120,000 Taboola Ordinary Shares to be purchased by the Secondary Investors pursuant to the Secondary Purchase Agreements at a price per share of $10.00.
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“Sponsor Support Agreement” means the agreement pursuant to which the Sponsors agreed to undertake certain actions in support of the Business Combination, including, but not limited to, delivering a voting proxy pursuant to which the Sponsors will vote in favor of the proposals presented for approval herein.
“Sponsors” means ION Holdings 1, LP and ION Co-Investment LLC.
“Stock Split” means the forward stock split to cause the value of the outstanding Taboola Ordinary Shares immediately prior to the Effective Time to equal $10.00 per share.
“Subscription Agreements” means the subscription agreements entered into by the PIPE Investors providing for the purchase by the PIPE Investors at the Effective Time of an aggregate of 13,500,000 PIPE Shares at a price per share of $10.00.
“Taboola” means Taboola.com Ltd., a company organized under the laws of the State of Israel.
“Taboola Ordinary Shares” means each ordinary share of Taboola, no par value per share.
“Taboola Shareholder Support Agreement” means the agreement pursuant to which certain Taboola shareholders parties thereto agreed, among other things, to undertake certain actions in support of the Business Combination, including, but not limited to, delivering a voting proxy pursuant to which Taboola’s shareholders parties thereto constituting the requisite majority or supermajority will vote in favor of the proposals presented for approval at Taboola’s shareholder meeting.
“Taboola Warrant” means a warrant of Taboola to be issued to ION Warrant holders and the Taboola Ordinary Shares underlying such warrants.
“Transactions” means the Business Combination and the other transactions contemplated by the Merger Agreement.
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SUMMARY OF THE MATERIAL TERMS OF THE TRANSACTION
The descriptions below of the material terms of the Transactions are intended to be summaries of such terms. Such descriptions do not purport to be complete and are qualified in their entirety by reference to the terms of the agreements themselves.
Pursuant to the Merger Agreement, Merger Sub will merge with and into ION, with ION continuing as the surviving company, as a result of which (a) ION will become a wholly-owned subsidiary of Taboola, (b) each issued and outstanding ION Unit, consisting of one Class A Ordinary Share and one-fifth of one ION Warrant, will be automatically separated and the holder thereof will be deemed to hold one Class A Ordinary Share and one-fifth of one ION Warrant and (c) each Class B Ordinary Share will be automatically be converted into one Class A Ordinary Share. See the section entitled “The Merger Agreement and Ancillary Documents.”
Concurrently with the consummation of the Business Combination, each issued and outstanding ION Class A Ordinary Share will no longer be outstanding and will automatically be converted into the right of the holder thereof to receive one Taboola Ordinary Share after giving effect to the Stock Split. Each outstanding ION Warrant will be assumed by Taboola and will become exercisable for Taboola Ordinary Shares.
The Merger Agreement also contemplates the execution by the parties of various agreements at the Effective Time, including, among others, the agreements described below.
Sponsor Support Agreement
Concurrently with the execution and delivery of the Merger Agreement, ION, Taboola, and ION Holdings 1, LP (“ION Holdings”) and ION Co-Investment LLC entered into the Sponsor Support Agreement pursuant to which the Sponsors agreed to undertake certain actions in support of the Business Combination, including, but not limited to, voting the ION Covered Shares (as defined below) in favor of the proposals presented for approval herein.
Taboola Shareholder Support Agreement
Concurrently with the execution and delivery of the Merger Agreement, Taboola, ION, and certain of Taboola’s shareholders entered into the Taboola Shareholder Support Agreement pursuant to which certain shareholders agreed, among other things, to undertake certain actions in support of the Business Combination, including, but not limited to, voting Taboola shares representing the requisite majority or supermajority in favor of the proposals presented for approval at Taboola’s shareholder meeting.
Investors’ Rights Agreement
Concurrently with the execution and delivery of the Merger Agreement, each of the Sponsors and certain of Taboola’s shareholders entered into an Amended and Restated Investors’ Rights Agreement (the “Investors’ Rights Agreement”), to be effective as of the Effective Time, pursuant to which Taboola agreed to file a registration statement as soon as practicable upon receipt of a request from certain significant shareholders of Taboola to register the resale of certain registrable securities under the Securities Act, subject to required notice provisions to other shareholders party thereto. Taboola has also agreed to provide customary “piggyback” registration rights with respect to such registrable securities and, subject to certain circumstances, to file a resale shelf registration statement to register the resale under the Securities Act of such registrable securities. Taboola has also agreed to file a resale shelf registration statement to register the resale of Taboola Warrants held by the Sponsors. In addition, in connection with the execution of the Investors’ Rights Agreement, ION has agreed to terminate the existing ION registration rights agreement.
The Investors’ Rights Agreement also imposes certain resale restrictions on the Taboola Ordinary Shares and the Taboola Warrants held by the shareholders of Taboola or the Sponsors parties to the Investors’ Rights Agreement. See section entitled “Taboola Ordinary Shares Eligible for Future Sale.”
Subscription Agreements
Concurrently with the execution of the Merger Agreement, Taboola and the PIPE Investors have entered into the Subscription Agreements pursuant to which the PIPE Investors have committed to purchase an aggregate of 13,500,000 PIPE Shares from Taboola at a price per share of $10.00, for gross proceeds to Taboola of $135,000,000. Pursuant to the Subscription Agreements, Taboola has agreed to file a registration statement registering the resale of the PIPE Shares within thirty (30) days after consummation of the Transactions.
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Secondary Share Purchase Agreements and Letter Agreements
Concurrently with the execution of the Merger Agreement, Taboola and the Secondary Investors have entered into the Secondary Purchase Agreements pursuant to which the Secondary Investors have committed to purchase Taboola Ordinary Shares from certain employees and shareholders of Taboola, and, under certain circumstances, from Taboola, an aggregate of 15,120,000 Secondary Shares at a price per share of $10.00, for gross proceeds of $151,200,000. Pursuant to a letter agreement entered into between Taboola and each Secondary Investor, Taboola has agreed to file a registration statement registering the resale of the Secondary Shares within thirty (30) days after consummation of the Transactions.
In addition to voting on the Business Combination Proposal, the Merger Proposal and the Share Capital Proposal the shareholders of ION will also vote on a proposal to approve, if necessary, an adjournment of the meeting. See the sections entitled “Proposal No. 1—The Business Combination Proposal,” “Proposal No. 2—The Merger Proposal,” “Proposal No. 3—The Share Capital Proposal” and “Proposal No. 4—The Adjournment Proposal.”
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
The questions and answers below highlight only selected information from this proxy statement/prospectus and only briefly address some commonly asked questions about the meeting and the proposals to be presented at the meeting, including with respect to the Business Combination. The following questions and answers do not include all the information that is important to ION shareholders. ION shareholders are urged to read carefully this entire proxy statement/prospectus, including the Annexes and the other documents referred to herein, to fully understand the Business Combination and the voting procedures for the meeting.
Q.
Why am I receiving this proxy statement/prospectus?
A.
ION and Taboola have agreed to a Business Combination under the terms of the Merger Agreement that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A, and ION encourages its shareholders to read it in its entirety. ION’s shareholders are being asked to consider and vote upon (i) an Ordinary Resolution to approve, ratify and adopt the Merger Agreement and approve the transactions contemplated thereby (the “Business Combination Proposal”) and (ii) a Special Resolution to approve the Plan of Merger and to authorize the merger of Merger Sub with and into ION, with ION surviving the merger as a wholly owned subsidiary of Taboola, and the issuance of ordinary shares of Taboola to ION shareholders as merger consideration (the “Merger Proposal”). See the sections entitled “Proposal No. 1—The Business Combination Proposal” and “Proposal No. 2—The Merger Proposal”.
Q.
Are there any other matters being presented to shareholders at the meeting?
A.
In addition to voting on the Business Combination, the shareholders of ION are being asked to consider and vote on (i) an Ordinary Resolution to approve the alteration of the authorized share capital of ION at the Effective Time (upon its becoming a wholly owned subsidiary of Taboola) (the “Share Capital Proposal”) and (ii) an Ordinary Resolution to approve, if necessary, the adjournment of the meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Merger Proposal (the “Adjournment Proposal”), which proposal will only be presented at the meeting if there are not sufficient votes to approve the Business Combination Proposal and the Merger Proposal. See the sections entitled “Proposal No. 3—The Share Capital Proposal” and “Proposal No. 4—The Adjournment Proposal.”
ION will hold the meeting to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the Business Combination and the other matters to be acted upon at the meeting. Shareholders should read it carefully.
Consummation of the Business Combination is conditional on approval of the Business Combination Proposal and the Merger Proposal.
The vote of shareholders is important. Shareholders are encouraged to vote as soon as possible after carefully reviewing this proxy statement/prospectus.
Q.
I am an ION warrant holder. Why am I receiving this proxy statement/prospectus?
A.
Upon consummation of the Business Combination, the ION Warrants will, by their terms, be assumed by Taboola and thereby entitle the holders to purchase Taboola Ordinary Shares (and not Class A Ordinary Shares) at a purchase price of $11.50 per share. This proxy statement/prospectus includes important information about Taboola and the business of Taboola and its subsidiaries following consummation of the Business Combination. ION urges you to read the information contained in this proxy statement/prospectus carefully.
Q.
Why is ION proposing the Business Combination?
A.
ION was organized to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.
On October 6, 2020, ION completed its initial public offering of ION Units, with each unit consisting of one Class A Ordinary Share and one-fifth of one ION Warrant, with each whole ION Warrant entitling the holder thereof to purchase one Class A Ordinary Share at a price of $11.50, raising total gross proceeds of approximately $258,750,000. Since the IPO, ION’s activity has been limited to the evaluation of business combination candidates.
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Taboola is a technology company that powers recommendations across the Open Web with an artificial intelligence-based, algorithmic engine developed over the 13 years since the company’s founding in 2007. Taboola partners with websites, devices, and mobile apps, collectively referred to as digital properties, to recommend editorial content and advertisements on the Open Web, outside of the closed ecosystems of the “walled gardens” such as Facebook, Google, and Amazon. Digital properties use Taboola’s recommendation platform to achieve their business goals, such as driving new audiences to their sites and apps, or increasing engagement with existing audiences. Taboola also provides monetization opportunities to digital properties by surfacing paid recommendations by advertisers. Unlike walled gardens, Taboola is a business-to-business company with no competing consumer interests. Taboola empowers advertisers to leverage its AI-powered recommendation platform to reach targeted audiences utilizing effective, native ad-formats across digital properties. Taboola generates revenues when people click on or, in some cases, view the ads that appear within its recommendation platform. Advertisers pay Taboola for those clicks or impressions, and Taboola shares a portion of the resulting revenue with the digital properties who display those ads. Based on its due diligence investigation of Taboola and the industries in which it operates, including the financial and other information provided by Taboola in the course of their negotiations in connection with the Merger Agreement, ION believes that Taboola has the opportunity to grow its business due to the size of the Open Web advertising market and is well-positioned to be the market leader in a rapidly growing market for recommendation systems among Open Web participants. As a result, ION believes that a business combination with Taboola will provide ION shareholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section entitled “Proposal No. 1—The Business Combination Proposal—ION’s Reasons for the Business Combination and Recommendation of the Board of Directors.”
Q.
Did the Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?
A.
The Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. ION’s management, including its directors and officers, has many years of experience in both operational management and investment and financial management and analysis. In the opinion of the Board, ION’s management, including its directors and officers, was suitably qualified to conduct the due diligence review and other investigations required in connection with the search for a business combination partner and to evaluate the operating and financial merits of companies like Taboola. The Board believed, based on the operational, investment and financial experience and background of its directors, that the Board was qualified to conclude that the Business Combination was fair, from a financial point of view, to ION’s shareholders and to make other necessary assessments and determinations regarding the Business Combination. The Board also determined, without seeking a valuation from a financial advisor, that Taboola’s fair market value was at least 80% of the assets held in the Trust Account (excluding the amount of any marketing fee held in trust). Accordingly, investors will be relying solely on the judgment of the Board and ION’s management in valuing Taboola’s business.
Q.
Do I have redemption rights?
A.
If you are a holder of Class A Ordinary Shares, you have the right to demand that ION redeem such shares for a pro rata portion of the cash held in ION’s trust account, including interest earned on the trust account. ION sometimes refers to these rights to demand redemption of the Class A Ordinary Shares as “redemption rights.”
Notwithstanding the foregoing, a holder of Class A Ordinary Shares, together with any affiliate or any other person with whom he or she is acting in concert or as a partnership, syndicate, or other group, will be restricted from seeking redemption with respect to more than 20% of the issued and outstanding Class A Ordinary Shares. Accordingly, all Class A Ordinary Shares in excess of 20% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed.
Under the amended and restated memorandum and articles of association of ION (the “ION Articles”), the Business Combination may be consummated only if ION has at least $5,000,001 of net tangible assets after giving effect to all redemptions of Class A Ordinary Shares. If redemptions exceed the maximum redemption scenario described herein, ION will need to seek additional debt or equity financing, which may only be obtained with the prior written consent of Taboola.
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Q.
Will how I vote on the Business Combination Proposal and the Merger Proposal affect my ability to exercise redemption rights?
A.
No. You may exercise your redemption rights irrespective of whether you vote your Class A Ordinary Shares for or against the Business Combination Proposal and the Merger Proposal or any other proposal described in this proxy statement/prospectus. As a result, the Merger Agreement can be approved by shareholders who will redeem their Class A Ordinary Shares and no longer remain shareholders, leaving shareholders who choose not to redeem their Class A Ordinary Shares holding shares in a company with a less liquid trading market, fewer shareholders, less cash and the potential inability to meet the listing standards of NYSE or Nasdaq.
Q.
How do I exercise my redemption rights?
A.
If you are a holder of Class A Ordinary Shares or ION Units and wish to exercise your redemption rights, you must (i) if you hold your Class A Ordinary Shares through ION Units, elect to separate your ION Units into the underlying Class A Ordinary Shares and ION Warrants and (ii) prior to    , Eastern time, on   , 2021, (a) submit a written request to the Transfer Agent that ION redeem your Class A Ordinary Shares for cash and (b) deliver your share certificates (if any) and other redemption forms (as applicable) to the Transfer Agent physically or electronically using the Depository Trust Company’s (“DTC”) DWAC (Deposit and Withdrawal at Custodian) System. Any holder of Class A Ordinary Shares will be entitled to demand that such holder’s Class A Ordinary Shares be redeemed for a full pro rata portion of the amount then held in the trust account, including interest earned on the trust account (which, for illustrative purposes, was approximately $      , or $       per Class A Ordinary Share, as of          , 2021). Such amount, less any owed but unpaid taxes on the funds in the trust account, will be paid promptly upon consummation of the Business Combination.
Any request for redemption, once made by a holder of Class A Ordinary Shares, may not be withdrawn once submitted to the Transfer Agent unless the Board determines (in its sole discretion) to permit the withdrawal of such redemption request (which they may do in whole or in part). If you deliver your share certificates (if any) and other redemption forms (as applicable) for redemption to the Transfer Agent and later decide to withdraw such request prior to the deadline for submitting redemption requests, you may request that the Transfer Agent return the shares and share certificates (if any) (physically or electronically). You may make such request by contacting the Transfer Agent at the address listed at the end of this section.
Any corrected or changed proxy card or written demand of redemption rights must be received by the Transfer Agent prior to the vote taken on the Business Combination Proposal and the Merger Proposal at the meeting. No demand for redemption will be honored unless the holder’s certificates for their Class A Ordinary Shares (if any) and any other redemption forms (as applicable) have been delivered (either physically or electronically) to the Transfer Agent prior to the deadline for submitting redemption requests.
If the redemption demand is properly made as described above and the Business Combination is consummated, ION will redeem these Class A Ordinary Shares for a pro rata portion of funds deposited in the trust account. If you exercise your redemption rights, then you will be exchanging your Class A Ordinary Shares for cash and will not be entitled to ordinary shares of Taboola upon consummation of the Business Combination.
If you are a holder of Class A Ordinary Shares and you exercise your redemption rights, it will not result in the loss of any ION Warrants that you may hold. Your ION Warrants will become exercisable to purchase Taboola Ordinary Shares in lieu of Class A Ordinary Shares for a purchase price of $11.50 upon consummation of the Business Combination.
Q.
Do I have appraisal rights if I object to the proposed Business Combination?
A.
None of the unit holders or warrant holders have appraisal rights in connection the Business Combination under the Companies Act (as amended) of the Cayman Islands as the same may be amended from time to time (the “Companies Act”). ION shareholders may be entitled to give notice to ION prior to the meeting that they wish to dissent to the Business Combination and to receive payment of fair market value for his or her ION shares if they follow the procedures set out in the Companies Act, noting that any such dissention rights may be limited pursuant to Section 239 of the Companies Act which states that no such dissention rights shall be available in respect of shares of any class for which an open market exists on a recognized stock exchange at the expiry date of the period allowed for written notice of an election to dissent provided that the merger consideration constitutes inter alia shares of any company which at the effective date of the merger are listed on a national
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securities exchange. It is ION’s view that such fair market value would equal the amount which ION shareholders would obtain if they exercise their redemption rights as described herein. See the section entitled “Extraordinary General Meeting of ION Shareholders—Appraisal Rights.”
Q.
What happens to the funds deposited in the trust account after consummation of the Business Combination?
A.
Upon consummation of the IPO, ION deposited $258,750,000 in the trust account. Upon consummation of the Business Combination, the funds in the trust account will be used to pay holders of the Class A Ordinary Shares who properly exercise redemption rights and to pay fees and expenses incurred in connection with the Business Combination (including aggregate fees of up to $9,056,259 as marketing fees). Any remaining cash will be used for Taboola’s working capital and general corporate purposes.
Q.
What happens if the Business Combination is not consummated?
A.
If ION does not complete the Business Combination for any reason, ION would search for another target business with which to complete a business combination. If ION does not complete an initial business combination by October 6, 2022, ION must redeem 100% of the outstanding Class A Ordinary Shares, at a per-share price, payable in cash, equal to the amount then held in the trust account, including interest earned on the funds held in the trust account and not previously released to ION (less taxes payable and up to $100,000 of interest to pay dissolution expenses) divided by the number of outstanding Class A Ordinary Shares. The Sponsors and the directors and executive officers of ION have no redemption rights in respect of their Class A Ordinary Shares contained in the private placement ION Units or their Class B Ordinary Shares in the event a business combination is not effected in the required time period, and, accordingly, such shares will be worthless. Additionally, in the event of such liquidation, there will be no distribution with respect to ION’s outstanding ION Warrants, and accordingly, such ION Warrants will be worthless.
Q.
How does the Sponsor intend to vote on the proposals?
A.
The Sponsors are record holders and are entitled to vote an aggregate of approximately 19.77% of the issued and outstanding ION Ordinary Shares. The Sponsors have agreed to vote any ION Ordinary Shares held by them, as of the record date, in favor of the Business Combination.
Q.
When do you expect the Business Combination to be completed?
A.
It is currently anticipated that the Business Combination will be consummated promptly following the meeting which is set for     , Eastern time, on    , 2021; however, such meeting could be adjourned, as described above. For a description of the conditions to the completion of the Business Combination, see the section entitled “The Merger Agreement and Ancillary Documents — Conditions to Closing.
Q.
What do I need to do now?
A.
ION urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a shareholder and/or warrant holder of ION. Shareholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.
Q.
How do I vote?
A.
If you are a holder of record of ION Ordinary Shares on the record date, you may vote at the meeting or by submitting a proxy for the meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. Any shareholder wishing to attend the hybrid virtual meeting should register for the meeting by            , 2021. To register for the meeting, please follow these instructions as applicable to the nature of your ownership of ION Ordinary Shares:
If your shares are registered in your name with Continental Stock Transfer & Trust Company, the transfer agent to ION (the “Transfer Agent”) and you wish to attend the hybrid virtual meeting, go to https://www.cstproxy.com/ionacquisitioncorp1/sm2021, enter the 12-digit control number included on your
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proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.
Beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the hybrid virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the hybrid virtual meeting. After contacting the Transfer Agent, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the hybrid virtual meeting. Beneficial shareholders should contact the Transfer Agent at least five (5) business days prior to the meeting date in order to ensure access.
Q.
If my ION Ordinary Shares are held in “street name,” will my broker, bank or nominee automatically vote my ION Ordinary Shares for me?
A.
No. Your broker, bank or other nominee cannot vote your ION Ordinary Shares unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or other nominee. Broker non-votes are shares held in “street name” by brokers, banks and other nominees that are present or represented by proxy at the meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or other nominee does not have discretionary voting power on such proposal. Because, under NYSE rules, brokers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the four proposals described in this proxy statement, if a beneficial owner of ION Ordinary Shares held in “street name” does not give voting instructions to the broker, bank or other nominee, then those shares will not be counted as present or by represented proxy at the meeting.
Q.
May I change my vote after I have mailed my signed proxy card?
A.
Yes. Shareholders may send a later-dated, signed proxy card to the Transfer Agent at the address set forth at the end of this section so that it is received prior to the vote at the meeting or attend the meeting and vote. Shareholders also may revoke their proxy by sending a notice of revocation to ION’s Secretary, which must be received prior to the vote at the meeting.
Q.
What constitutes a quorum for the meeting?
A.
A quorum is the minimum number of ION Ordinary Shares that must be present to hold a valid meeting. A quorum will be present at the meeting if the holders of a majority of all the ION Ordinary Shares entitled to vote at the meeting are represented at the hybrid virtual meeting or by proxy. Abstentions will be counted as present for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. The Sponsors are record holders and are entitled to vote an aggregate of approximately 19.77% of the issued and outstanding ION Ordinary Shares. The Sponsors have agreed to appear at an ION shareholder meeting to establish a quorum for the purpose of approving the ION transaction proposals. In addition to the ION Ordinary Shares held by the Sponsors, ION would need 9,809,859 shares, or approximately 30.33%, of the 32,343,750 issued and outstanding ION Ordinary Shares to appear at an ION shareholder meeting in order to establish a quorum.
Q.
What shareholder vote thresholds are required for the approval of each proposal brought before the meeting?
A.
The approval of the Merger Proposal requires a Special Resolution, being a resolution passed by the affirmative vote of at least two-thirds of the votes cast by the shareholders present or represented by proxy and entitled to vote at the meeting, as set out above as a matter of Cayman Islands law. The approval of the Business Combination Proposal, the Share Capital Proposal and the Adjournment Proposal requires an Ordinary Resolution, being a resolution passed by the affirmative vote of a simple majority of the votes cast by the shareholders present or represented by proxy and entitled to vote at the meeting, as set out in the ION Articles.
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Accordingly, assuming that a quorum is present, an ION shareholder’s failure to vote, as well as an abstention and a broker non-vote, will have no effect on the outcome of the Business Combination Proposal, the Merger Proposal, the Share Capital Proposal and the Adjournment Proposal.
The Sponsors are record holders and are entitled to vote an aggregate of approximately 19.77% of the issued and outstanding ION Ordinary Shares. The Sponsors have agreed to vote any ION Ordinary Shares held by them, as of the record date, in favor of the Business Combination. Assuming only a majority of all the ION Ordinary Shares entitled to vote at the meeting are represented at the hybrid virtual meeting or by proxy, in addition to the ION Ordinary Shares held by the Sponsors, ION would need 4,408,453 shares, or approximately 13.63%, of the 32,343,750 issued and outstanding ION Ordinary Shares to be voted in favor of the Merger Proposal and 1,707,750 shares, or approximately 5.28%, of the 32,343,750 issued and outstanding ION Ordinary Shares to be voted in favor of the Business Combination Proposal, the Share Capital Proposal and the Adjournment Proposal in order for them to be approved. Assuming all of the ION Ordinary Shares entitled to vote at the meeting are represented at the hybrid virtual meeting or by proxy, in addition to the ION Ordinary Shares held by the Sponsors, ION would need 15,169,219 shares, or approximately 46.90%, of the 32,343,750 issued and outstanding ION Ordinary Shares to be voted in favor of the Merger Proposal and 9,809,859 shares, or approximately 30.33%, of the 32,343,750 issued and outstanding ION Ordinary Shares to be voted in favor of the Business Combination Proposal, the Share Capital Proposal and the Adjournment Proposal in order for them to be approved.
Q.
What happens if I fail to take any action with respect to the meeting?
A.
If you fail to take any action with respect to the meeting and the Business Combination is approved by shareholders and consummated, you will become a shareholder of Taboola and/or your ION Warrants will be assumed by Taboola and will entitle you to purchase Taboola Ordinary Shares on the same terms as your ION Warrants. If you fail to take any action with respect to the meeting and the Business Combination Proposal and the Merger Proposal are not approved, you will continue to be a shareholder and/or warrant holder of ION.
Q.
What should I do with my share and/or warrants certificates?
A.
Those shareholders who do not elect to have their Class A Ordinary Shares redeemed for their pro rata share of the trust account should not submit their share certificates now. After the consummation of the Business Combination, Taboola will send instructions to ION shareholders regarding the exchange of their Class A Ordinary Shares for Taboola Ordinary Shares. ION shareholders who exercise their redemption rights must deliver their share certificates (if any) and any other redemption forms (as applicable) to the Transfer Agent (either physically or electronically) prior to the deadline for submitting redemption requests described above.
Upon consummation of the Business Combination, the ION Warrants, by their terms, will be assumed by Taboola and thereby entitle holders to purchase Taboola Ordinary Shares (and not Class A Ordinary Shares) on the same terms as your ION Warrants. Therefore, warrant holders need not deliver their ION Warrants to ION or Taboola at that time.
Q.
What should I do if I receive more than one set of voting materials?
A.
Shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your ION Ordinary Shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold ION Ordinary Shares. If you are a holder of record and your ION Ordinary Shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your ION Ordinary Shares.
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Q.
Who can help answer my questions?
A.
If you have questions about the Business Combination or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact:
ION Acquisition Corp 1 Ltd.
89 Medinat Hayehudim Street
Herzliya 4676672, Israel
Tel: +972 (9) 970-3620
Email: anthony@ion-am.com
or:
Morrow Sodali LLC
470 West Avenue
Stamford, CT 06902
Individuals call toll-free (800) 662-5200
Banks and brokers call (203) 658-9400
Email: IACA.info@investor.morrowsodali.com, as proxy solicitor
You may also obtain additional information about ION from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of Class A Ordinary Shares and you intend to seek redemption of your Class A Ordinary Shares, you will need to deliver your share certificates (if any) and any other redemption forms (as applicable) (either physically or electronically) to the Transfer Agent at the address below prior to the vote at the meeting. If you have questions regarding the certification of your position or delivery of your share certificates (if any) and any other redemption forms (as applicable), please contact:
Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, New York 10004
(212) 509-4000
Attn: Mark Zimkind
E-mail: mzimkind@continentalstock.com
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SUMMARY
This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You should carefully read the entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus, including the annexes and exhibits, to fully understand the Merger Agreement, the Business Combination and the other matters being considered at the extraordinary general meeting of ION shareholders. For additional information, see “Where You Can Find More Information” beginning on page 233. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.
Information About the Companies
Taboola.com Ltd.
Taboola is a technology company that powers recommendations across the Open Web with an artificial intelligence-based, algorithmic engine developed over the 13 years since the company’s founding in 2007. Taboola partners with websites, devices, and mobile apps, collectively referred to as digital properties, to recommend editorial content and advertisements on the Open Web, outside of the closed ecosystems of the “walled gardens” such as Facebook, Google, and Amazon. Digital properties use Taboola’s recommendation platform to achieve their business goals, such as driving new audiences to their sites and apps, or increasing engagement with existing audiences. Taboola also provides monetization opportunities to digital properties by surfacing paid recommendations by advertisers. Unlike walled gardens, Taboola is a business-to-business company with no competing consumer interests. Taboola empowers advertisers to leverage its AI-powered recommendation platform to reach targeted audiences utilizing effective, native ad-formats across digital properties. Taboola generates revenues when people click on or, in some cases, view the ads that appear within its recommendation platform. Advertisers pay Taboola for those clicks or impressions, and Taboola shares a portion of the resulting revenue with the digital properties who display those ads.
The mailing address of Taboola’s principal executive office is 16 Madison Square West, 7th fl., New York, NY, 10010 and its telephone number is (212) 206-7663.
Toronto Sub Ltd.
Toronto Sub Ltd., is a newly formed Cayman Islands exempted company and a wholly owned subsidiary of Taboola. Merger Sub was formed solely for the purpose of effecting the proposed Merger with ION and has not carried on any activities other than in connection with the proposed Merger. The address and telephone number for Merger Sub’s principal executive offices are the same as those for Taboola.
ION Acquisition Corp 1 Ltd.
ION was organized to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.
On October 6, 2020, ION completed its initial public offering of ION Units, with each unit consisting of one Class A Ordinary Share and one-fifth of one ION Warrant, with each whole warrant entitling the holder thereof to purchase one Class A Ordinary Share at a price of $11.50, raising total gross proceeds of approximately $258,750,000. Since the IPO, ION’s activity has been limited to the evaluation of business combination candidates.
The mailing address of ION Acquisition Corp 1 Ltd.’s principal executive office is 89 Medinat Hayehudim, Herzliya 4676672, Israel, and its telephone number is +972 (9) 970-3620. After the consummation of the Merger, ION’s principal executive office will be that of Taboola.
The Business Combination
The terms and conditions of the Business Combination are contained in the Merger Agreement, which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the Business Combination Agreement carefully, as it is the legal document that governs the Business Combination.
If the business combination proposal is approved and adopted and the Business Combination is subsequently completed, Merger Sub will merge with and into ION with ION surviving the merger as a wholly owned subsidiary of Taboola.
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Merger Consideration
Immediately prior to the Effective Time, (i) each preferred share, with no par value, of Taboola (each, a “Taboola Preferred Share”) will be converted into a Taboola Ordinary Share in accordance with Taboola’s organizational documents and (ii) immediately following such conversion but prior to the Effective Time, Taboola will effect a stock split of each Taboola Ordinary Share into such number of Taboola Ordinary Shares calculated in accordance with the terms of the Merger Agreement such that each Taboola Ordinary Share will have a value of $10.00 per share after giving effect to such stock split (the “Stock Split” and, together with the conversion of Taboola Preferred Shares, the “Capital Restructuring”).
Pursuant to the Merger Agreement, immediately prior to the Effective Time, each (i) Class B Ordinary Share will be automatically converted into one (1) Class A Ordinary Share in accordance with the terms of ION’s organizational documents and, after giving effect to such automatic conversion, at the Effective Time and as a result of the Business Combination, each issued and outstanding Class A Ordinary Share will no longer be outstanding and will automatically be converted into the right of the holder thereof to receive one Taboola Ordinary Share after giving effect to the Capital Restructuring and (ii) issued and outstanding ION Warrant will automatically and irrevocably be assumed by Taboola and converted into a corresponding Taboola Warrant exercisable for Taboola Ordinary Shares. Immediately prior to the Effective Time, the Class A Ordinary Shares and the ION Warrants comprising each issued and outstanding ION Unit, consisting of one Class A Ordinary Share and one-fifth of one ION Warrant, will be automatically separated and the holder thereof will be deemed to hold one Class A Ordinary Share and one-fifth of one ION Warrant. No fractional ION Warrants will be issued in connection with such separation such that if a holder of such ION Units would be entitled to receive a fractional ION Warrant upon such separation, the number of ION Warrants to be issued to such holder upon such separation will be rounded down to the nearest whole number of ION Warrants and no cash will be paid in lieu of such fractional ION Warrants.
The authorized share capital of ION will be altered at the Effective Time to US$50,000 divided into 500,000,000 shares with a nominal or par value of US$0.0001 each, to reflect its becoming a wholly owned subsidiary of Taboola pursuant to the Merger Agreement.
ION’s Reasons for the Business Combination and Recommendation of the Board
At a meeting of the Board held on January 24, 2021, the Board unanimously determined that the form, terms and provisions of the Merger Agreement, including all exhibits and schedules attached thereto, including the Sponsor Support Agreement and the Taboola Shareholder Support Agreement, are in the best interests of ION, adopted and approved the Merger Agreement and the Transactions, determined to recommend to ION’s shareholders that they approve and adopt the Merger Agreement, the Sponsor Support Agreement and the Taboola Shareholder Support Agreement and approve the Business Combination and the other matters proposed in this proxy statement/prospectus and determined that the foregoing be submitted for consideration by ION’s shareholders at the extraordinary general meeting of ION’s shareholders. When you consider the Board’s recommendation, you should be aware that ION’s directors may have interests in the Business Combination that may be different from, or in addition to, the interests of ION’s shareholders generally. These interests are described in the section entitled “—Interests of Certain Persons in the Business Combination.”
The Board unanimously recommends that shareholders vote “FOR” the Business Combination Proposal, “FOR” the Merger Proposal and “FOR” the Share Capital Proposal, and “FOR” the Adjournment Proposal if the Adjournment Proposal is presented to the meeting.
Certain factors considered by the Board in reaching its unanimous resolution as described above can be found in the section entitled “Proposal No. 1—The Business Combination Proposal—ION’s Reasons for the Business Combination and Recommendation of the Board of Directors” beginning on page 69.
Related Agreements
Sponsor Support Agreement
Concurrently with the execution and delivery of the Merger Agreement, ION, Taboola, and the Sponsors entered into the Sponsor Support Agreement pursuant to which the Sponsors agreed to, among other things, (i) appear at an ION shareholder meeting to establish a quorum for the purpose of approving the ION transaction proposals; (ii) execute a written consent in favor of the ION transaction proposals; (iii) vote Class B Ordinary Shares, Class A Ordinary Shares, and Class A Ordinary Shares underlying ION Warrants (collectively, the “ION Covered Shares”)
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in favor of the ION transaction proposals, including the approval of the Business Combination and the other Transactions; and (iv) vote all ION Covered Shares against (A) any other business combination transaction with ION or any other action or agreement that will reasonably be expected to (1) frustrate the purposes of the Transactions (including consummation thereof) or adversely affect the Transactions, (2) result in a breach any covenant, representation, or warranty of ION under the Merger Agreement or cause any of the conditions to Closing set forth in the Merger Agreement not to be fulfilled, or (3) result in a breach any covenant, representation, or warranty of the Sponsors under the Sponsor Support Agreement; and (B) any merger agreement or merger, combination, or sale of substantial assets other than the Business Combination and any change in the business, management or board of directors of ION.
Pursuant to the Sponsor Support Agreement, the Sponsors are required to deliver a voting proxy in the form attached to the Sponsor Support Agreement pursuant to which the Sponsors will vote in favor of the proposals included therein on (or effective as of) the fifth (5th) day following delivery of notice of the ION shareholder meeting.
Taboola Shareholder Support Agreement
Concurrently with the execution and delivery of the Merger Agreement, Taboola, ION, and certain of Taboola’s shareholders entered into the Taboola Shareholder Support Agreement pursuant to which each of those Taboola shareholders will agree, among other things, to (i) appear at a Taboola shareholder meeting to establish a quorum for the purpose of approving the Taboola transaction proposals; (ii) execute a written consent in favor of the Taboola transaction proposals; (iii) vote all Taboola shares in favor of the Taboola transaction proposals, including the approval of the Business Combination and the other Transactions; and (iv) vote all Taboola shares against (A) any other business combination transaction with Taboola or any other action or agreement that will reasonably be expected to (1) frustrate the purposes of the Transactions (including consummation thereof) or adversely affect the Transactions, (2) result in a breach any covenant, representation, or warranty of Taboola under the Merger Agreement or cause any of the conditions to Closing set forth in the Merger Agreement not to be fulfilled, or (3) result in a breach any covenant, representation, or warranty of Taboola shareholders under the Taboola Shareholder Support Agreement; and (B) any merger agreement or merger, combination, or sale of substantial assets other than the Business Combination.
The shareholders of Taboola that are parties to the Taboola Shareholder Support Agreement have further agreed to deliver a voting proxy in the form attached to the Taboola Shareholder Support Agreement pursuant to which shareholders representing the requisite majority or supermajority will vote in favor of the proposals included therein on (or effective as of) the fifth (5th) day following delivery of notice of the Taboola shareholder meeting.
Investors’ Rights Agreement
Concurrently with the execution and delivery of the Merger Agreement, each of the Sponsors, and certain of Taboola’s shareholders, entered into the Investors’ Rights Agreement, to be effective as of the Effective Time, pursuant to which Taboola agreed to file a registration statement as soon as practicable upon a request from certain significant shareholders of Taboola to register the resale of certain registrable securities under the Securities Act, subject to required notice provisions to other shareholders party thereto. Taboola has also agreed to provide customary “piggyback” registration rights with respect to such registrable securities and, subject to certain circumstances, to file a resale shelf registration statement to register the resale under the Securities Act of such registrable securities. Taboola has also agreed to file a resale shelf registration statement to register the resale of Taboola Warrants held by the Sponsors. In addition, in connection with the execution of the Investors’ Rights Agreement, ION has agreed to terminate the existing ION registration rights agreement.
The Investors’ Rights Agreement also provides that (a) the Taboola Ordinary Shares held by shareholders of Taboola that held such shares prior to the Closing (excluding the PIPE Shares, the Secondary Shares and publicly listed Taboola Ordinary Shares acquired after the Closing) and any Taboola Ordinary Shares issuable upon the exercise of Taboola Warrants and any other securities convertible or exercisable for Taboola Ordinary Shares held by security holders prior to the Closing will be locked-up for one hundred eighty (180) days following the Closing (except any party to the Investors’ Rights Agreement that is an employee of Taboola may sell Taboola Ordinary Shares to the extent permitted by Taboola’s Articles of Association to be adopted in connection with the Transactions), (b) the Taboola Shares held by the Sponsors after the Closing (other than the PIPE Shares, the Secondary Shares (as defined below), any Taboola Ordinary Shares underlying Taboola Warrants issued in exchange for ION Warrants held by the Sponsors at the Closing and publicly listed Taboola Ordinary Shares acquired after the
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Closing) will be locked-up until the earlier of (i) one (1) year from the Closing and (ii) the date on which the closing price of Taboola Ordinary Shares equals or exceeds $12.00 per share for any twenty (20) trading days within any thirty (30) trading day period commencing at least one hundred fifty (150) days following the Closing and (c) the Taboola Warrants issued in exchange for ION Warrants at the Closing and any Taboola Ordinary Shares underlying such warrants that are held by the Sponsors will be locked-up for thirty (30) days following the Closing.
The Investors’ Rights Agreement also provides that Taboola will pay certain expenses relating to such registrations and indemnify the securityholders against certain liabilities. The rights granted under the Investors’ Rights Agreement supersede any prior registration, qualification, or similar rights of the parties with respect to their Taboola securities or ION securities, and all such prior agreements shall be terminated.
Subscription Agreements
Concurrently with the execution of the Merger Agreement, Taboola and the PIPE Investors have entered into the Subscription Agreements pursuant to which the PIPE Investors have committed to purchase an aggregate of 13,500,000 PIPE Shares from Taboola at a price per share of $10.00, for gross proceeds to Taboola of $135,000,000. The price per share to be paid by the PIPE Investors pursuant to the Subscription Agreements assumes that Taboola has effected the Stock Split. The closing of the PIPE Investment is conditioned upon, among other things, the consummation of the Transactions. The PIPE Investors are not obligated to consummate the PIPE Investment in the event that ION asserts that any of the conditions to ION’s obligation to close (but not mutual conditions) set forth in the Merger Agreement has not been or will not be satisfied. However, unless the Subscription Agreements have been earlier terminated, if ION and Taboola subsequently consummate the Transaction, the PIPE Investors will be obligated to consummate the PIPE Investment.
Taboola has agreed to file a registration statement registering the resale of the PIPE Shares within thirty (30) days after consummation of the Transactions.
Secondary Share Purchase Agreements and Letter Agreements
Concurrently with the execution of the Merger Agreement, Taboola and the Secondary Investors have entered into the Secondary Purchase Agreements pursuant which the Secondary Investors have committed to purchase Taboola Ordinary Shares from certain employees and shareholders of Taboola, and, under certain circumstances, from Taboola, an aggregate of up to 15,120,000 Secondary Shares at a price per share of $10.00, for gross proceeds of up to $151,200,000. In the event that the sum of the funds contained in the Trust Account, after giving effect to the ION Shareholder Redemptions and the payment of ION’s transaction costs, Taboola’s transaction costs and ION’s unpaid liabilities, plus the PIPE Investment is less than $200,000,000, then a portion of the Secondary Purchases in an amount equal to such shortfall will be reallocated to investments by institutional Secondary Investors into Taboola on a pro rata basis.
Each Secondary Investor agreed to fund the purchase price for its Secondary Shares at least two (2) business days prior to the anticipated closing date of the Transactions. The price per share to be paid by the Secondary Investors pursuant to the Secondary Purchase Agreements assumes that Taboola has effected the Stock Split. The closing of the Secondary Purchases is conditioned upon, among other things, the consummation of the Transactions. The Secondary Investors are not obligated to consummate the Secondary Purchases in the event that ION asserts that any of the conditions to ION’s obligation to close (but not mutual conditions) set forth in the Merger Agreement have not been or will not be satisfied. However, unless the Secondary Share Purchase Agreements have been earlier terminated, if ION and Taboola subsequently consummate the Transaction, the Secondary Investors will be obligated to consummate the Secondary Purchases.
Pursuant to a letter agreement entered into between Taboola and each Secondary Investor, Taboola has agreed to file a registration statement within thirty (30) days after consummation of the Transactions registering the resale of the Secondary Shares.
Certain Material U.S. Federal Income Tax Considerations
For a description of certain U.S. federal income tax consequences of the Business Combination, the exercise of redemption rights in respect of Class A Ordinary Shares and the ownership and disposition of Taboola Ordinary Shares and/or Taboola Warrants, please see the information set forth in “Certain Material U.S. Federal Income Tax Considerations” beginning on page 94.
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Certain Material Israeli Tax Considerations
For a description of certain Israeli tax consequences of the Business Combination and the ownership and disposition of Taboola Ordinary Shares and/or Taboola Warrants, please see the information set forth in “Certain Material Israeli Tax Considerations” beginning on page 113.
Redemption Rights
Pursuant to the ION Articles, a holder of Class A Ordinary Shares may demand that ION redeem such shares for cash if the business combination is consummated; provided that ION may not consummate the Business Combination if it has less than $5,000,001 of net tangible assets upon consummation of the Business Combination. Holders of Class A Ordinary Shares will be entitled to receive cash for these shares only if they deliver their shares to the Transfer Agent no later than two (2) business days prior to the meeting. Holders of Class A Ordinary Shares do not need to affirmatively vote on the Business Combination Proposal or be a holder of such Class A Ordinary Shares as of the record date to exercise redemption rights. If the Business Combination is not consummated, these shares will not be redeemed for cash. If a holder of Class A Ordinary Shares properly demands redemptions, delivers his, her or its shares to the Transfer Agent as described above, and the Business Combination is consummated, ION will convert each Class A Ordinary Shares into a full pro rata portion of the trust account, calculated as of two (2) business days prior to the date of the meeting. It is anticipated that this would amount to approximately $     per share. If a holder of Class A Ordinary Shares exercises his, her or its redemption rights, then it will be exchanging its shares of Class A Ordinary Shares for cash and will not become a shareholder of Taboola. See the section of this proxy statement/prospectus titled “Extraordinary General Meeting of ION Shareholders—Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your shares for cash. The ION Articles provide that in no event will ION redeem Class A Ordinary Shares in an amount that would cause its net tangible assets to be less than $5,000,001. Additionally, if a “group” of ION shareholders are deemed to hold in excess of 20% of its Class A Ordinary Shares, such shareholders will lose the ability to redeem all such shares in excess of 20% of Class A Ordinary Shares.
Holders of ION Warrants do not have redemption rights with respect to such securities.
Appraisal Rights
None of the ION shareholders or warrant holders have appraisal rights in connection with the Business Combination under the Companies Law.
For further details, see “Appraisal Rights”.
The Proposals
At the extraordinary general meeting, ION is asking its shareholders:
(1)
Proposal No. 1 — The Business Combination Proposal — An Ordinary Resolution to approve, ratify and adopt the Merger Agreement (to which the form of Plan of Merger required by the Companies Act (as amended) of the Cayman Islands (the “Plan of Merger”) is appended), a copy of which is attached to this proxy statement as Annex A, and approve the transactions contemplated thereby; and
(2)
Proposal No. 2 — The Merger Proposal — A Special Resolution to approve the Plan of Merger and to authorize the merger of Merger Sub with and into ION, with ION surviving the merger as a wholly owned subsidiary of Taboola, and the issuance of Taboola Ordinary Shares to ION shareholders as merger consideration; and
(3)
Proposal No. 3 — The Share Capital Proposal — An Ordinary Resolution to approve the alteration of the authorized share capital of ION at the effective time of the Business Combination (upon its becoming a wholly owned subsidiary of Taboola); and
(4)
Proposal No. 4 — The Adjournment Proposal — An Ordinary Resolution to approve, if necessary, the adjournment of the meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Merger Proposal. This proposal will only be presented at the meeting if there are not sufficient votes to approve the Business Combination Proposal and the Merger Proposal.
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Comparison of Rights of Shareholders of ION and Shareholders of Taboola
If the Business Combination is successfully completed, holders of ION Ordinary Shares will become holders of Taboola Ordinary Shares, and their rights as shareholders will be governed by Taboola’s organizational documents. There are also differences between the laws governing ION, a Cayman Islands exempted company, and Taboola, an Israeli company. Please see “Comparison of Rights of Taboola Shareholders and ION Shareholders”.
Summary Risk Factors
You should consider all the information contained in this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. In particular, you should consider the risk factors described under “Risk Factors” beginning on page 17. Such risks include, but are not limited to:
If Taboola is unable to attract new digital properties and advertisers, sell additional offerings to its existing digital properties and advertisers, or maintain enough business with its existing digital properties and advertisers;
If Taboola’s performance under contracts with digital properties where Taboola is obligated to pay a specified minimum guaranteed amount per thousand impressions does not meet the minimum guarantee requirements, its Gross profit could be negatively impacted and its results of operations and financial condition could be harmed;
Taboola may not be able to compete successfully against current and future competitors;
Taboola’s future growth and success depends on its ability to continue to scale its existing offerings and to introduce new solutions that gain acceptance and that differentiate it from its competitors;
If Taboola fails to make the right investment decisions in its offerings and technology platform, or if Taboola is unable to generate or otherwise obtain sufficient funds to invest in them, Taboola may not attract and retain digital properties and advertisers;
If Taboola’s ability to personalize its advertisements and content to users is restricted or prohibited due to various privacy regulations, Taboola could lose digital properties and advertisers;
If Taboola’s AI powered platform fails to accurately predict what ads and content would be of most interest to users or if Taboola fail to continue to improve on its ability to further predict or optimize user engagement or conversion rates for its advertisers, its performance could decline and Taboola could lose digital properties and advertisers;
Taboola’s business depends on continued engagement by users who interact with its platform on various digital properties;
The effects of health epidemics, such as the recent global COVID-19 pandemic, have had and could in the future have an adverse impact on Taboola’s revenue, its employees and results of operations;
Historically, the majority of Taboola’s agreements with digital properties have typically required them to provide it exclusivity for the term of the agreement; to the extent that such exclusivity is reduced or eliminated for any reason, digital properties could elect to implement competitive platforms or services that could be detrimental to its performance;
Taboola’s business depends on strong brands and well-known digital properties, and failing to maintain and enhance its brands and well-known digital properties would hurt its ability to expand its number of advertisers and digital properties;
Taboola is a multinational organization faced with complex and changing laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters;
Conditions in Israel could adversely affect Taboola’s business;
Directors of ION have potential conflicts of interest in recommending that ION shareholders vote in favor of approval of the Merger Agreement and the transactions contemplated thereby, including the Business Combination, and approval of the other proposals described in this proxy statement/prospectus;
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If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of, prior to the Business Combination, ION’s securities or, following the Business Combination, Taboola’s securities, may decline;
The Board has not obtained and will not obtain a third-party valuation or financial opinion in determining whether or not to proceed with the Business Combination;
If ION shareholders fail to properly demand redemption rights, they will not be entitled to redeem their Class A Ordinary Shares for a pro rata portion of the trust account; and
The other matters described in the section titled “Risk Factors” beginning on page 17.
Recent Developments
Selected Unaudited Financial Results as of and for the Three Months Ended March 31, 2021
Set forth below are our selected unaudited financial results as of and for the three months ended March 31, 2021 and the corresponding amounts for the three months ended March 31, 2020. We are only presenting selected unaudited financial results and we are not presenting complete financial results for the three months ended March 31, 2021 or 2020 because we are a “foreign private issuer” for SEC reporting purposes. This selected unaudited financial information included below does not present and is not required to present all of the information that would be required to be included in a Form 10-Q filed with the SEC, does not include notes, and should not be viewed as a substitute for complete interim financial statements prepared in accordance with the SEC requirements for quarterly financial reports. The selected unaudited financial results set forth below have been prepared by, and are the responsibility of, management and are based on a number of assumptions. Neither the Taboola’s independent auditors, nor any other independent accountants, have audited, reviewed, compiled, examined, or performed any procedures with respect to the selected unaudited financial results, nor have they expressed any opinion or any other form of assurance on such information, and assume no responsibility for, and disclaim any association with, the selected unaudited financial results. In addition, the selected unaudited financial results set forth below are not necessarily indicative of the results we may achieve in any future periods. For additional information, see “Risk Factors.”
The following tables present selected historical consolidated financial data for our business. You should read this information in conjunction with “Taboola’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated audited financial statements and related notes and the other information included elsewhere in this proxy statement/prospectus. We derived the consolidated balance sheet data as of December 31, 2020 from our audited consolidated financial statements that are included elsewhere in this proxy statement/prospectus.
Key Financial and Operating Metrics
We regularly monitor a number of metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.
 
Three Months Ended
March 31,
(dollars in thousands)
2021
2020
 
Unaudited
Revenues
$302,950
$279,346
Gross profit
$ 89,499
$ 52,776
Net income (loss)
$ 18,587
$ (23,853)
Net income (loss) Margin
6.14%
(8.54)%
Ratio of Net income (loss) to Gross profit
20.77%
(45.20%)
Net cash provided by (used in) operating activities
$ (9,103)
$ 11,008
Cash, cash equivalents and short-term deposits
$229,287
$ 118,644
 
 
 
Non-GAAP Financial Data*
 
 
ex-TAC Gross Profit
$105,914
$ 68,968
Adjusted EBITDA
$ 33,543
$ (1,720)
Ratio of Adjusted EBITDA to ex-TAC Gross Profit
31.67%
(2.49)%
Free Cash Flow
$ (14,640)
$ 4,031
*
Non-GAAP measures. Refer to “Taboola’s Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non- GAAP Financial Measures” for information on how we compute these measures and “Reconciliation of GAAP to non-GAAP Financial Measures” below for reconciliation to GAAP metrics.
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Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
 
March 31,
2021
December 31,
2020
(dollars in thousands)
Unaudited
Audited
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and cash equivalents
$229,287
$ 242,811
Restricted deposits
60
3,664
Trade receivables, net
125,609
158,050
Prepaid expenses and other current assets
32,317
21,609
Total current assets
387,273
426,134
NON-CURRENT ASSETS
 
 
Long-term prepaid expenses
18,490
5,289
Restricted deposits
4,250
3,300
Deferred tax assets
1,556
1,382
Right of use assets
65,008
68,058
Property and equipment, net
59,207
52,894
Intangible assets, net
3,266
3,905
Goodwill
19,206
19,206
Total non-current assets
170,983
154,034
Total assets
$ 558,256
$580,168
 
 
 
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY
 
 
CURRENT LIABILITIES
 
 
Trade payable
$152,924
$189,352
Lease liability
15,622
15,746
Accrued expenses and other current liabilities
85,587
95,135
Total current liabilities
254,133
300,233
 
 
 
LONG TERM LIABILITIES
 
 
Deferred tax liabilities
995
45
Lease liability
58,891
63,044
Total long-term liabilities
59,886
63,089
CONVERTIBLE PREFERRED SHARES
 
 
Preferred A, B, B-1, B-2, C, D and E shares with no par value - Authorized: 45,688,037 shares at March 31, 2021 (unaudited) and December 31, 2020; Issued and outstanding: 44,978,000 shares at March 31, 2021 (unaudited) and December 31, 2020: Aggregate liquidation preference of 314,680 and 308,765 as of March 31, 2021 and December 31, 2020, respectively.
170,206
170,206
 
 
 
SHAREHOLDERS' EQUITY
 
 
Ordinary shares with no par value- Authorized: 330,000,000 and 65,366,595 shares as of March 31, 2021 (unaudited) and December 31, 2020 respectively; 16,364,539 and 15,313,447 shares issued and outstanding as of March 31, 2021 (unaudited) and December 31, 2020, respectively
Additional paid-in capital
86,941
78,137
Accumulated deficit
(12,910 )
(31,497 )
Total shareholders' equity
74,031
46,640
Total liabilities, convertible preferred shares, and shareholders' equity
$558,256
$580,168
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Consolidated Statements of Income (Loss) for the three months ended March 31, 2021 and 2020
 
Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Revenues
$ 302,950
$ 279,346
Cost of revenues:
 
 
Traffic acquisition cost
197,036
210,378
Other cost of revenues
16,415
16,192
Total cost of revenues
213,451
226,570
Gross profit
89,499
52,776
Operating expenses:
 
 
Research and development expenses
23,893
21,999
Sales and marketing expenses
34,308
35,436
General and administrative expenses
9,676
15,179
Total operating expenses
67,877
72,614
Operating income (loss) before finance expenses
21,622
(19,838)
Finance income (expenses), net
(798 )
448
Income (loss) before income taxes
20,824
( 19,390)
Provision for income taxes
2,237
4,463
Net income (loss)
$ 18,587
$ (23,853 )
 
 
 
Less: Undistributed earnings allocated to participating securities
(5,915)
(5,582)
Net income (loss) attributable to ordinary shares – basic and diluted
12,672
(29,435 )
 
 
 
Net income (loss) per share attributable to ordinary shareholders, basic
$ 0.78
$ (1.78)
Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, basic
16,344,356
16,491,783
 
 
 
Net income (loss) per share attributable to ordinary shareholders, diluted
$ 0.46
$ (1.78)
Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, diluted
27,819,375
16,491,783
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
 
Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
$ 18,587
$ (23,853)
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
 
 
Depreciation and amortization
8,244
9,751
Share based compensation expenses
5,131
2,270
Net loss from financing expenses
1,613
1,341
Increase (decrease) in deferred taxes, net
776
(566)
Accrued interest, net
177
 
 
 
Change in operating assets and liabilities:
 
 
Decrease in trade receivables
32,441
25,048
Decrease (increase) in prepaid expenses and other current assets and long-term prepaid expenses
(16,759)
5,916
Decrease in trade payable
(47,522)
(4,813)
Change in operating lease Right of use assets
3,632
3,296
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Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Change in operating Lease liabilities
(4,859)
(5,314)
Decrease in accrued expenses and other current liabilities
(10,387 )
(2,245 )
Net cash provided by (used in) operating activities
(9,103 )
11,008
 
 
 
Cash flows from investing activities:
 
 
Purchase of property and equipment, including capitalized platform costs
(5,537)
(6,977)
Cash paid in connection with acquisitions
(202)
Decrease (increase) in restricted deposits
2,654
(4)
Decrease in short-term deposits
12,963
Net cash provided by (used in) investing activities
(2,883 )
5,780
 
 
 
Cash flows from financing activities:
 
 
Exercise of options
3,551
277
Payment of deferred offering cost
(3,476 )
Net cash provided by financing activities
75
277
 
 
 
Exchange differences on balances of cash, cash equivalents
(1,613)
(1,341)
 
 
 
Increase (decrease) in cash, cash equivalents
(13,524)
15,724
Cash, cash equivalents - at the beginning of the period
242,811
86,920
Cash, cash equivalents - at end of the period
$229,287
$102,644
 
 
 
Supplemental disclosures of cash flow information:
 
 
Cash paid for income taxes
$ 1,329
$ 588
 
 
 
Supplemental disclosures of noncash investing and financing activities:
 
 
Deferred offering costs incurred during the period included in the Long-term prepaid expenses
$ 3,674
$
Purchase of property, plant and equipment
$ 10,138
$ 1,446
Reconciliation of GAAP to non-GAAP Financial Measures
The following table provides a reconciliation of Gross profit to ex-TAC Gross Profit, a non-GAAP measure.
 
Three Months Ended March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Revenues
$ 302,950
$ 279,346
Traffic acquisition cost
(197,036)
(210,378)
Other cost of revenues
(16,415 )
(16,192 )
Gross profit
$ 89,499
$ 52,776
Adjusted to include the following:
 
 
Other cost of revenues
16,415
16,192
ex-TAC Gross Profit
$ 105,914
$ 68,968
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The following table provides a reconciliation of Net income (loss) to Adjusted EBITDA, a non-GAAP measure.
 
Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Net income (loss)
$18,587
$ (23,853)
Adjusted to exclude the following:
 
 
Financial expenses (income)
798
(448)
Tax expenses
2,237
4,463
Depreciation and amortization
8,244
9,751
Share-based compensation expenses
5,131
2,270
M&A costs (reimbursements) (1)
(1,454)
6,097
Adjusted EBITDA
$33,543
$ (1,720)
(1)
Costs and reimbursements primarily related to the proposed strategic transaction with Outbrain Inc., which we elected not to consummate.
We calculate Ratio of Net income (loss) to Gross profit as Net income (loss) divided by Gross profit. We calculate Ratio of Adjusted EBITDA to ex-TAC Gross Profit, a non-GAAP measure, as Adjusted EBITDA divided by ex-TAC Gross Profit. We believe that the Ratio of Adjusted EBITDA to ex-TAC Gross Profit is useful because TAC is what we must pay digital properties to obtain the right to place advertising on their websites, and we believe focusing on ex-TAC Gross Profit better reflects the profitability of our business. The following table reconciles Ratio of Net income (loss) to Gross Profit and Ratio of Adjusted EBITDA to ex-TAC Gross Profit for the period shown.
 
Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Gross profit
$ 89,499
$ 52,776
Net income (loss)
$ 18,587
$ (23,853)
Ratio of Net income (loss) to Gross profit
20.77 %
(45.20) %
 
 
 
ex-TAC Gross Profit
$105,914
$ 68,968
Adjusted EBITDA
$ 33,543
$ (1,720)
Ratio of Adjusted EBITDA to ex-TAC Gross Profit
31.67%
(2.49)%
The following table provides a reconciliation of Net cash provided by operating activities to Free Cash Flow, a non-GAAP measure.
 
Three Months Ended
March 31,
 
2021
2020
(dollars in thousands)
Unaudited
Net cash provided by (used in) operating activities
$ (9,103)
$ 11,008
Purchases of property and equipment, including capitalized platform costs
(5,537)
(6,977)
Free Cash Flow
$ (14,640)
$ 4,031
Comparison of the Three Months Ended March 31, 2021 and 2020
Revenues increased $23.6 million, or 8.4%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. New digital property partners within the first 12 months that were live on our network contributed approximately $22 million of new Revenues. Net growth of existing digital property partners, including the growth of new digital property partners (beyond the revenue contribution determined based on the run-rate revenue generated by them when they are first on-boarded) contributed the remainder of the increase in revenues.
Gross profit increased $36.7 million, or 69.6%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The improvement in Gross profit was driven primarily by strong yield, the
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revenue we make per advertising placement. The year-over-year growth was unusually high due to lower advertising demand in the three months ended March 31, 2020 at the beginning of the COVID-19 pandemic.
Ex-TAC Gross Profit, a non-GAAP measure, increased $36.9 million, or 53.6%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The improvement in Ex-TAC Gross Profit was also driven primarily by strong yield, the revenue we make per advertising placement. The year-over-year growth was unusually high due to lower advertising demand in the three months ended March 31, 2020 at the beginning of the COVID-19 pandemic.
Cost of revenues decreased $13.1 million, or 5.8%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This decrease was primarily attributed to Traffic acquisition cost, which decreased $13.3 million, or 6.3%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Revenues increased while Traffic acquisition cost decreased due to a mix shift to higher margin digital properties and increased yield on digital properties with guarantee obligations. The cost of guarantees (total payments due under guarantee arrangements in excess of amounts we would otherwise be required to pay under revenue sharing arrangements) as a percentage of Traffic acquisition cost were approximately 10% for the three months ended March 31, 2021.
Research and development expenses increased by $1.9 million, or 8.6%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of an increase of $3.5 million in employee related costs attributable to higher compensation, partially offset by $1.2 million lower depreciation expenses.
Sales and marketing expenses decreased by $1.1 million, or 3.2%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of a decrease of $1.9 million in marketing event costs, partially offset by an increase of $0.5 million in employee related costs attributable to higher compensation.
General and administrative expenses decreased by $5.5 million, or 36.3%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of a $7.0 million decrease in acquisition related expenses related to our terminated acquisition of Outbrain, partially offset by an increase of $0.9 million in employee related costs attributable to higher compensation.
Finance income (expenses), net decreased by $1.2 million, or 278.1%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of $1.0 million higher foreign currency exchange loss, partially offset by an increase of $0.2 million in interest income from investments.
Income (loss) before income taxes increased by $40.2 million, or 207.4%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to an increase in revenues of $23.6 million, a decrease in Traffic acquisition cost of $13.3 million and a decrease in acquisition related expenses of $7.0 million, partially offset by $4.7 million increase in employee related costs.
Tax expense decreased by $2.2 million, or 49.9%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily driven by lower taxes in foreign jurisdictions of $3.4 million, partially offset by higher valuation allowance for deferred tax assets of $1.2 million.
Net income increased $42.4 million, or 177.9%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was primarily a result of an increase in revenues of $23.6 million, a decrease in Traffic acquisition cost of $13.3 million and a decrease in acquisition related expenses of $7.0 million related to our terminated acquisition of Outbrain in 2020, partially offset by a $4.7 million increase in employee related costs.
Liquidity and Capital Resources
Our primary cash needs are for working capital, possible future acquisitions, contractual obligations and other commitments. To date, we have financed our operations primarily through private equity financings and, more recently, cash generated by operations. Cash used in operations was $9.1 million in the three months ended March 31, 2021.
As of March 31, 2021, we had $229.3 million of cash and cash equivalents and $4.3 million in restricted deposits, used as security for our lease commitments. We believe that this, together with net proceeds from our engagements with advertisers, clients and digital property partners, will provide us with sufficient liquidity to meet
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our working capital and capital expenditure needs for at least the next 12 months. In the future, we may be required to obtain additional equity or debt financing in order to support our continued capital expenditures and operations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our business, growth, and results of operations.
In light of the recent worldwide COVID-19 pandemic, we are closely monitoring the effect that current economic conditions may have on our working capital requirements. To date, the pandemic has not had a material negative impact on our cash flow or liquidity. We cannot provide any assurance regarding future possible COVID-19-related impacts on our business.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors.”
Operating Activities
During the three months ended March 31, 2021, Net cash used in operating activities of $9.1 million was due to net cash outflows of $43.5 million, partially offset by positive adjustments for non-cash charges of $15.8 million and our net income of $18.6 million.
The $15.8 million of non-cash charges primarily consisted of depreciation and amortization of $8.2 million and share-based compensation of $5.1 million, $1.6 million of finance expenses and $0.8 million increase in deferred taxes.
The $43.5 million decrease in cash resulting from changes in working capital primarily consisted of $47.5 million decrease in trade payables, a $16.8 million increase in other current assets (including prepaid expenses), $10.4 million decrease in other current liabilities, and a $1.2 million decrease due to changes in operating lease liabilities and right of use assets, partially offset by a $32.4 million decrease in accounts receivable. The changes in working capital were driven primarily by timing of digital property partner payments, including some extraordinary COVID-19 related guarantee repayments in the three months ended March 31, 2021 and seasonal collections trends.
During the three months ended March 31, 2020, Net cash provided by operating activities of $11.0 million was due to net cash inflows of $21.9 million, positive adjustments for non-cash charges of $13.0 million, partially offset by our net loss of $23.9 million.
The $13.0 million of non-cash charges primarily consisted of depreciation and amortization of $9.8 million and share-based compensation of $2.3 million, $1.3 million of finance expenses, $0.2 million of accrued interest, partially offset by $0.6 million increase in deferred taxes.
The $21.9 million increase in cash resulting from changes in working capital primarily consisted of $25.0 million decrease in accounts receivable and a $5.9 million decrease in other current assets (including prepaid expenses), partially offset by a $4.8 million decrease in trade payables, $2.2 million decrease in other current liabilities, and a $2.0 million decrease due to changes in operating lease liabilities and right of use assets. The changes in working capital were driven primarily by seasonal collections trends.
Investing Activities
During the three months ended March 31, 2021, Net cash used in investing activities was $2.9 million, consisting of $5.5 million purchases of property and equipment, including capitalized platform costs, partially offset by $2.7 million of proceeds from restricted deposits.
During the three months ended March 31, 2020, Net cash provided by investing activities was $5.8 million, consisting of $13.0 million of proceeds from short term deposits,partially offset by $7.0 million purchases of property and equipment, including capitalized platform costs and $0.2 million acquisition cost.
Financing Activities
During the three months ended March 31, 2021, Net cash provided by financing activities was $0.1 million, resulting from $3.6 million proceeds received from share option exercises, partially offset by $3.5 million payment of deferred offering cost.
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During the three months ended March 31, 2020, Net cash provided by financing activities was $0.3 million, resulting from proceeds received from share option exercises.
Amendment to Merger Agreement
On April 27, 2021, the parties to the Merger Agreement amended the Merger Agreement to permit as a closing condition the listing of the Taboola Ordinary Shares on Nasdaq in addition to NYSE and to extend the Outside Date (as defined herein) from June 25, 2021, to July 9, 2021. The amendment to the Merger Agreement is filed as Exhibit 2.2 hereto.
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UNAUDITED HISTORICAL COMPARATIVE AND PRO FORMA COMBINED
PER SHARE DATA OF ION AND TABOOLA
The following table sets forth summary historical comparative share and unit information for ION and Taboola and unaudited pro forma combined per share information of Taboola after giving effect to the Transactions (as defined in the section titled “Unaudited Pro Forma Combined Financial Information”), assuming two redemption scenarios as follows:
Assuming No Redemptions: This presentation assumes that no ION shareholders exercise redemption rights with respect to their Class A Ordinary Shares.
Assuming Maximum Redemptions: This presentation assumes that ION shareholders holding approximately 20,189,024 Class A Ordinary Shares will exercise their redemption rights with respect to their portion of the aggregate of approximately $259 million of funds in ION’s trust account. Taboola’s obligations under the Merger Agreement are subject to the funds contained in the trust account (after giving effect to the ION redemptions), together with the aggregate amount of proceeds under the Subscription Agreements for the PIPE Investment and the Secondary Purchase Agreements for the Secondary Purchases, equaling or exceeding $450 million (the “Minimum Cash Condition”). Furthermore, ION will only proceed with the Business Combination if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination.
The unaudited pro forma book value information reflects the Transactions as if they had occurred on December 31, 2020. The weighted average shares outstanding and net earnings per share information reflect the Transactions as if they had occurred on January 1, 2020.
This information is only a summary and should be read together with the summary historical financial information included elsewhere in this proxy statement/prospectus, and the historical financial statements of ION and Taboola and related notes that are included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information of ION and Taboola is derived from, and should be read in conjunction with, the unaudited pro forma combined financial statements and related notes included elsewhere in this proxy statement/consent solicitation statement/prospectus.
The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of ION and Taboola would have been had the companies been combined during the periods presented.
 
 
 
 
Combined Pro Forma and
Equivalent Pro Forma (4)(5)(6)
 
ION
Taboola
Taboola
Post-Split (3)
Assuming No
Redemptions
Assuming
Maximum
Redemptions
As of and for the Year Ended December 31, 2020 (1)
 
 
 
 
 
Book value per share (2)
$ 0.6
$ 3.12
$ 1.16
$ 2.45
$ 1.66
Weighted average shares outstanding—basic and diluted
8,358,653
14,934,590
40,333,847
212,569,808
192,380,784
Net income (loss) per share—basic and diluted
$ (2.51)
$ (0.97)
$ (0.36)
$ (0.08)
$ (0.10)
(1)
No cash dividends were declared under the periods presented.
(2)
Book value per share equals total equity excluding convertible preferred shares and shares subject to possible redemption divided by total weighted shares outstanding. The ION historical weighted average shares outstanding excludes the shares subject to redemption for ION at December 31, 2020.
(3)
Calculated for standalone Taboola after giving effect to the Stock Split based on a forward stock split ratio of 1:2.7007 but without giving effect to the consummation of the Business Combination or the conversion of Taboola preferred shares to Taboola Ordinary Shares.
(4)
In connection with the Business Combination, shareholders of ION will receive one Taboola Ordinary Share for every ION Ordinary Share held, after giving effect to the assumed 1-for-2.7007 forward share split to be effectuated by Taboola for the purpose of causing the value of the outstanding Taboola Ordinary Shares immediately prior to the Effective Time to equal $10.00 per share.
(5)
Equivalent pro forma per share amounts were calculated by multiplying the pro forma book value per share and pro forma loss per share by the exchange ratio of one Taboola Ordinary Share for one ION Ordinary Share (the “Exchange Ratio”).
(6)
Because the Exchange Ratio is 1:1, the pro forma book value per share and pro forma per share is equal to the Equivalent Pro Forma.
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PRICE RANGE OF SECURITIES AND DIVIDENDS
ION
ION Units, Class A Ordinary Shares and ION Warrants are currently listed on NYSE under the symbols “IACA.U”, “IACA” and “IACA WS”, respectively. Each ION Unit consists of one Class A Ordinary Share and one-fifth of one redeemable ION Warrant and each whole warrant entitles its holder to purchase one Class A Ordinary Share at an exercise price of $11.50 per share. ION Units commenced trading on NYSE on October 2, 2020. Class A Ordinary Shares and ION Warrants commenced trading on NYSE on October 27, 2020.
Holders
At the close of business on the record date, there were 4 holders of record of ION Units, 1 holder of record of Class A Ordinary Shares and 3 holders of record of ION Warrants. These numbers are not representative of the number of beneficial holders of our shares, nor is it representative of where such beneficial holders reside, since all of these shares held of record in the United States were held through CEDE & Co., the nominee company of the Depository Trust Company, on behalf of hundreds of firms of brokers and banks in the United States, who in turn held such shares on behalf of several thousand clients and customers.
Dividends
ION has not paid any dividends to its shareholders.
Taboola
Market Price of Taboola Ordinary Shares
Historical market price information regarding Taboola is not provided because there is no public market for their securities. Taboola is applying to list its ordinary shares and warrants on Nasdaq upon the Effective Time under the ticker symbols “TBLA” and “TBLAW,” respectively.
Holders
As of the date of this proxy statement/prospectus, Taboola had sixty-one holders of record.
Dividends
Taboola has not paid any dividends to its shareholders. Following the completion of the Business Combination, Taboola’s board of directors will consider whether or not to institute a dividend policy. It is presently intended that Taboola will retain its earnings for use in business operations and, accordingly, it is not anticipated that Taboola’s board of directors will declare dividends in the foreseeable future.
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RISK FACTORS
If the Business Combination is completed, the combined company will operate in a market environment that is difficult to predict and that involves significant risks, many of which will be beyond its control. ION Shareholders should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this proxy statement/prospectus. This proxy statement/prospectus also contains forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this proxy statement/prospectus.
Risks Related to Taboola’s Business and Our Industry
If we are unable to attract new digital properties and advertisers, sell additional offerings to our existing digital properties and advertisers, or maintain enough business with our existing digital properties and advertisers, our revenue growth prospects will be adversely affected.
We must add new digital properties and advertisers, and encourage existing digital properties and advertisers to add additional offerings from us, in order to sustain or increase our revenue. As the digital advertising industry matures and as competitors introduce more competitive pricing or differentiated products or services that compete with or are perceived to compete with ours, our ability to sell our solutions to new and existing digital properties and advertisers could be impaired. In addition, we may reach a point of saturation at which we cannot continue to grow our revenue from existing digital properties and advertisers because of internal limits they may place on the allocation of space on their sites, allocation of their advertising budgets to digital media, to particular campaigns, to a particular provider, or other reasons. We may also lose revenues if our existing digital properties and advertisers reduce the amount of business they do with us for any reason, including nonrenewal of their agreements with us. If we are unable to attract new digital properties and advertisers or obtain new business from existing digital properties and advertisers or maintain enough business with our existing digital properties and advertisers, our revenue, our revenue growth prospects and business will be adversely affected.
If our performance under contracts with digital properties, where we are obligated to pay a specified minimum guaranteed amount per thousand impressions, do not meet the minimum guarantee requirements, our gross profit could be negatively impacted and our results of operations and financial condition could be harmed.
A significant amount of our revenue comes from contracts with digital properties where we are obligated to pay a specified minimum guaranteed amount per thousand impressions to the digital property. In each of the years ended December 31, 2018 through 2020, our guarantee costs, which we calculate as total payments due under guarantee arrangements in excess of amounts we otherwise would have been required to pay under revenue sharing arrangements, as a percentage of our total payments to digital properties, or TAC, was approximately 15% or less. Although we focus on achieving sufficient revenue per impression through the improvement of our algorithms and using our scale to exceed the minimum guarantees made to digital properties, we may not succeed in doing so. In addition, due to unfavorable macroeconomic, competitive or other conditions, we may be unable to perform as expected under arrangements that provide for such minimum guarantees, in which case our gross profit could be negatively impacted and our results of operation and financial condition could be adversely affected.
We may not be able to compete successfully against current and future competitors because competition in our industry is intense and many competitors, such as Google and Facebook, have substantially more resources than we do. Our competitors may also offer solutions that are perceived by our digital properties and advertisers to be more attractive than our platform. These factors could result in declining revenue or inhibit our ability to grow our business.
Competition for our clients’ advertising budgets is intense. We compete for a share of total advertising budgets with online search and display advertising, including large “walled garden” advertising platforms such as Google and Facebook, and with traditional advertising media, such as direct mail, television, radio, cable and print. Many current and potential competitors have competitive advantages relative to us, such as longer operating histories, greater name recognition, larger client bases, greater access to advertising inventory on premium websites and significantly greater financial, technical, sales and marketing resources. Thus, increased competition may result in the loss of business or the inability to win new business, which could negatively affect our revenue and future operating results and our ability to grow our business.
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We also expect competition on the digital property side to continue increasing as the industry grows. Increased competition may require us to increase the revenue share with our digital properties, charge less for our solutions, or offer other pricing models that are less attractive to us, any of which could decrease our revenues and margins and harm our results of operations.
Our future growth and success depends on our ability to continue to scale our existing offerings and to introduce new solutions that gain acceptance from digital properties and advertisers and that differentiate us from our competitors.
Our future success depends on our ability to effectively scale our offerings as our business grows to keep pace with demand for our solutions, and achieve long-term profitability. If we fail to implement these changes on a timely basis, or if we are unable to implement them effectively or at all due to factors beyond our control or other reasons, our business may suffer. We may not be successful in addressing these and other challenges we may face in the future. As a growing company in a rapidly evolving industry, our business prospects depend in large part on our ability to:
develop and offer a competitive technology platform and offerings that meet our digital properties’ and advertisers’ needs as they change;
continuously innovate and improve on the algorithms underlying our technology in order to deliver positive results for our advertisers and digital properties;
build a reputation for superior solutions and create trust and long-term relationships with digital properties and advertisers;
distinguish ourselves from strong competitors in our industry;
maintain and expand our relationships with advertisers who can provide quality content and advertisements;
respond to evolving industry and government oversight, standards and regulations that impact our business, particularly in the areas of native advertising, data collection and consumer privacy;
prevent or otherwise mitigate failures or breaches of security or privacy; and
attract, hire, integrate and retain qualified and motivated employees.
If we are unable to meet one or more of these objectives or otherwise adequately address the risks and difficulties that we face, our business may suffer, our revenue may decline and we may not be able to achieve further growth or long-term profitability.
If we do not manage our growth effectively, the quality of our platform or our relationships with our digital properties and advertisers may suffer, and our operating results may be negatively affected.
Our business has grown rapidly. We rely heavily on information technology, or IT, systems to manage critical functions such as content recommendation, campaign management and operations, payment from advertisers and to digital properties, data storage and retrieval, revenue recognition, budgeting, forecasting, financial reporting and other administrative functions. To manage our growth effectively, we must continue to improve and expand our infrastructure, including our IT, financial and administrative systems and controls. We must also continue to manage our employees, operations, finances, research and development and capital investments efficiently. Our productivity and the quality of our platform may be adversely affected if we do not integrate and train our new employees, particularly our research and development, sales and account management personnel, quickly and effectively and if we fail to appropriately coordinate across our executive, finance, human resources, legal, marketing, sales, operations and advertiser support teams. If we continue our rapid growth, we will incur additional expenses, and our growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform. If we do not adapt to meet these evolving growth challenges, and if the current and future members of our management team do not effectively scale with our growth, the quality of our platform may suffer and our corporate culture may be harmed. Failure to manage our future growth effectively could cause our business to suffer, which, in turn, could have an adverse impact on our financial condition and results of operations.
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If we fail to make the right investment decisions in our offerings and technology platform, or if we are unable to generate or otherwise obtain sufficient funds to invest in them, we may not attract and retain digital properties and advertisers and our revenue and results of operations may decline.
Our industry is subject to rapid changes in standards, regulations, technologies, products and service offerings, as well as in digital property and advertiser demands and expectations. We continuously need to make decisions regarding which offerings and technology to invest in to meet such demands and evolving industry standards and regulatory requirements. We may make wrong decisions regarding these investments. If new or existing competitors offer more attractive offerings, we may lose digital property and/or advertisers, or advertisers may decrease their spending on our platform. New digital property or advertiser demands, superior competitive offerings, new industry standards or regulations could render our existing solutions unattractive, unmarketable or obsolete and require us to make substantial unanticipated changes to our technology platform or business model. Our failure to adapt to a rapidly changing market or to anticipate digital property and/or advertiser demands could harm our business and our financial performance.
We have had, and may in the future continue to have, significant fluctuations in our operating results, which make our future results difficult to predict and could cause our operating results to fall below investors’ expectations.
Our quarterly and annual operating results have fluctuated significantly in the past. Similarly, we expect our future operating results to fluctuate for the foreseeable future due to a variety of factors, many of which are beyond our control. Our fluctuating results could cause our performance to fall below the expectations of investors, and adversely affect the price of our ordinary shares. Because our business is changing and evolving rapidly, our historical operating results may not be useful in predicting our future operating results and it is difficult for us to accurately predict future results. In addition, our rapid growth has limited our ability to reliably track key business metrics and so we have limited understanding of certain aspects of our operations. For example, we do not have good visibility into the seasonality of our business due to the fact that our rapid growth may have masked seasonality. Factors that may increase the volatility of our operating results include the following:
the addition or loss of new digital properties;
changes in demand and pricing for our platform;
the seasonal nature of advertisers’ spending on digital advertising campaigns;
changes in our pricing policies or the pricing policies of our competitors;
the introduction of new technologies, product or service offerings by our competitors;
changes in advertisers’ budget allocations or marketing strategies;
changes and uncertainty in the regulatory environment for us or advertisers;
changes in the economic prospects of our digital properties and advertisers or the economy generally, which could alter current or prospective advertisers’ spending priorities, or could increase the time or costs required to complete sales with digital properties or advertisers;
changes in the availability of advertising inventory or in the cost to reach end consumers through digital advertising;
changes in our capital expenditures as we acquire the hardware, equipment and other assets required to support our business;
costs related to acquisitions of people, businesses or technologies; and
traffic patterns.
Based upon all of the factors described above and others that we may not anticipate, including those beyond our control, we have a limited ability to forecast our future revenue, costs and expenses. As a result, our operating results may from time to time fall below our estimates or the expectations of investors.
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If the use of “third party cookies” is rejected by Internet users, subject to unfavorable legislation or regulation, restricted, blocked or limited by technical changes on end users’ devices or Internet browsers, or our ability to use cookie data is otherwise restricted and we are unable to track users in some other way, our performance could decline and we could lose digital properties and advertisers and as a result, revenue.
We use “cookies” (small text files) to gather important data to help deliver our solutions. These cookies are placed through an Internet browser on an Internet user’s computer and correspond to a data set that we keep on our servers. Some of our cookies are “third party” cookies where we do not have a direct relationship with the Internet user. Our cookies collect information, such as when an Internet user views an internet site, clicks on an ad, or visits one of our digital properties. We use these cookies to help us achieve our digital property or advertisers’ campaign goals, to help us ensure that the same Internet user does not unintentionally see the same recommendations too frequently, to report aggregate information to our advertisers regarding the performance of their campaigns and to detect and prevent fraudulent activity. We also use data from cookies to help us decide on an opportunity to place a recommendation in a certain location, at a given time, in front of a particular Internet user. A lack of data associated with cookies may detract from our ability to make decisions about an advertiser’s campaign, and undermine the effectiveness of our solutions.
Cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers (including Chrome, Firefox, Internet Explorer, Edge and Safari) allow Internet users to prevent cookies from being accepted by their browsers. Internet users can also delete cookies from their computers at any time. Some Internet users also download “ad blocking” software that prevents cookies from being stored on a user’s computer. If more Internet users adopt these settings or delete their cookies more frequently than they currently do, our business could be harmed. Recently, there has been a general trend among Internet users to refuse to accept cookies on their Internet browsers. In addition, the Safari, Firefox and Edge browsers block cookies by default, and other browsers may do so in the future. Unless such default settings in browsers were altered by Internet users, we would be able to set fewer of our cookies in browsers, which could adversely affect our business. In addition, companies such as Google have publicly disclosed their intention to move away from cookies to another form of persistent unique identifier, or ID, to indicate Internet users in the bidding process on advertising exchanges. If such companies do not use shared IDs across the entire digital advertising ecosystem, this could have a negative impact on our ability to find the same anonymous user across different web properties, and reduce the effectiveness of our solutions. These web browser developers have significant resources at their disposal and command substantial market share, and any restrictions they impose could foreclose our ability to understand the preferences of a substantial number of consumers.
In addition, in the European Union, or EU, Directive 2009/136/EC, commonly referred to as the “Cookie Directive,” directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie, is allowed only if the Internet user has given his or her consent. As there were different transpositions of the Cookie Directive in domestic laws across the EU Member States, there are currently different interpretations of what constitutes valid consent (e.g., explicit versus implied consent) across the EU, posing a risk of regulatory divergence and creating legal uncertainty for businesses. The EU also has released a proposed replacement to the Cookie Directive, commonly known as the “ePrivacy Regulation,” to, among other things, better align EU member states and the rules governing online tracking technologies and electronic communications, such as unsolicited marketing and cookies, with the requirements of the European General Data Protection Regulation (GDPR). While the ePrivacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is currently going through the European legislative process, and commentators now expect it to be adopted in the coming years. Like the GDPR, the proposed ePrivacy Regulation has extra-territorial application as it applies to businesses established outside the EU who provide publicly-available electronic communications services to, or gather data from the devices of, users in the EU. The ePrivacy Regulation may impose burdensome requirements around obtaining consent and impose fines for violations that are materially higher than those imposed under the European Union’s current ePrivacy Directive and related EU member state legislation. Additionally, the use of cookies, as well as the use of the data collected using cookies, may be subject to further legislation or regulation. The United States and other governments have enacted or are considering legislation that regulate the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools.
Limitations on the use or effectiveness of cookies, or other limitations on our ability to collect and use data for advertising, whether imposed by EU member state implementations of the Cookie Directive, by the new ePrivacy Regulation, or otherwise, may impact the performance of our platform. We may be required to, or otherwise may determine that it is advisable to, make significant changes in our business operations and product and services to obtain user opt-in for cookies and use of cookie data, or develop or obtain additional tools and technologies to
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compensate for a lack of cookie data. We may not be able to make the necessary changes in our business operations and products and services to obtain user opt-in for cookies and use of cookie data, or develop, implement or acquire additional tools that compensate for the lack of data associated with cookies. Moreover, even if we are able to do so, such additional products and tools may be subject to further legislation or regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies.
If Taboola’s ability to personalize its advertisements and content to users is restricted or prohibited due to various privacy regulations, we could lose digital properties and advertisers, which could cause our financial condition, results of operations and revenues to decline.
The efficacy of our platform for both advertisers and digital properties relies, in part, on our ability to personalize the recommendations we serve to Internet users. If we are unable to personalize due to changes in various privacy regulations or for some other reason beyond our control, the efficacy of our platform may be negatively affected causing our business to suffer, which, in turn, could have an adverse impact on our financial condition, results of operations and revenues.
If Taboola’s AI powered platform fails to accurately predict what ads and content would be of most interest to users or if we fail to continue to improve on our ability to further predict or optimize user engagement or conversion rates for our advertisers, our performance could decline and we could lose digital properties and advertisers, which could cause our results of operations and revenues to decline.
The effective delivery of our solution depends on the ability of Taboola’s AI powered platform to predict what ads and content would be of most interest to users so that our advertisers can achieve desirable returns on their advertising spend. We need to continuously deliver satisfactory results for our advertisers and digital properties in terms of predicting user engagement and conversion rates in order to maintain and increase revenue, which in turn depends in part on the optimal functioning of Taboola’s AI powered platform. In addition, as we have increased the number of advertisers and digital properties that use our offerings on a global basis, we have experienced significant growth in the amount and complexity of data processed by Taboola’s AI and the number of ad and content impressions we deliver. As the amount of data and number of variables processed by Taboola’s AI powered platform increase, the risk of errors in the type of data collected, stored, generated or accessed also increases. In addition, the calculations that the algorithms must compute become increasingly complex and the likelihood of any defects or errors increases. If we were to experience significant errors or defects in Taboola’s AI powered platform, our solution could be impaired or stop working altogether, which could prevent us from generating any revenue until the errors or defects were detected and corrected. Other negative consequences from significant errors or defects in Taboola’s AI powered platform could include:
a loss of advertisers and digital properties;
fewer user visits to our digital properties;
lower click-through rates;
lower conversion rates;
lower profitability per impression, up to and including negative margins;
lower return on advertising spend for advertisers;
lower price for the advertising inventory we are able to offer to digital properties;
delivery of advertisements that are less relevant or irrelevant to users;
liability for damages or regulatory inquiries or lawsuits; and
harm to our reputation.
Furthermore, the ability of Taboola’s AI powered platform to accurately predict engagement by a user depends in part on our ability to continuously innovate and improve the algorithms underlying Taboola’s AI powered platform in order to deliver positive results for our advertisers and digital properties that can be clearly attributed to the services we provide. The failure to do so could result in delivering poor performance for our advertisers and a reduced ability to secure advertising inventory. If failures in Taboola’s AI powered platform or our inability to innovate and improve the algorithms underlying Taboola’s AI powered platform result in advertisers and digital properties ceasing to partner with us, we cannot guarantee that we will be able to replace, in a timely or effective manner, departing
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advertisers with new advertisers that generate comparable revenue or departing digital properties with new digital properties. As a result, the failure by Taboola’s AI powered platform to accurately predict user engagement or conversion rates and to continue to do so over time could result in significant costs to us and our results of operation and financial condition could be adversely affected.
Our business depends on continued engagement by users who interact with our platform on various digital properties. If users begin to ignore our platform or direct their attention to other elements on the digital property, our performance could decline and we could lose digital properties and advertisers, which could cause our results of operations and revenues to decline.
Our ability to sustain continued engagement by users who interact with our platform on various digital properties depends on our ability to continue to provide attractive content to users. If users begin to ignore our platform or direct their attention to other elements on the digital property, our performance could decline and digital property and advertiser satisfaction with our platform may decrease. Technological and other developments may also cause changes in consumer behavior that could affect the attractiveness of our content and ads to users.
While we have adopted a number of strategies and initiatives to address these challenges, there can be no guarantee that our efforts will be successful. If we are unable to demonstrate the continuing value of our platform to advertisers and digital properties, our results may suffer. A decrease in advertising expenditures by our advertisers could lead to a reduction in our ability to obtain high-quality content from digital properties, which in turn could have an adverse effect on our results of operations and revenues.
The effects of health epidemics, such as the recent global COVID-19 pandemic, have had and could in the future have an adverse impact on our revenue, our employees and results of operations.
Our business and operations have been and could in the future be adversely affected by health epidemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including in the regions in which we and our clients and partners operate, and are significantly impacting economic activity and financial markets. Many marketers have decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity, and other COVID-related impacts, which have negatively impacted, and may continue to negatively impact, our revenue and results of operations, the extent and duration of which we may not be able to accurately predict. For instance, we experienced a notable decline in advertising rates soon after the onset of the COVID-19 pandemic, and we attribute a 12% reduction in our second quarter of 2020 revenue to the pandemic. We took certain steps to address the reduction in advertising rates, which resulted in a gradual recovery in revenue that continued throughout the remainder of the year. See “Taboola's Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Factors and Trends Affecting our Performance—Impact of COVID-19.” In addition, our advertisers’ businesses or cash flows have been and may continue to be negatively impacted by COVID-19, which has and may continue to lead them to seek adjustments to payment terms or delay making payments or default on their payables, any of which may impact the timely receipt and/or collectability of our receivables.
Our operations are subject to a range of external factors related to the COVID-19 pandemic that are not within our control. We have taken precautionary measures intended to minimize the risk of the spread of the virus to our employees, partners and clients, and the communities in which we operate. A wide range of governmental restrictions has also been imposed on our employees’ and clients’ physical movement to limit the spread of COVID-19. There can be no assurance that precautionary measures, whether adopted by us or imposed by others, will be effective, and such measures could negatively affect our sales, marketing, and client service efforts, delay and lengthen our sales cycles, decrease our employees’ and clients’ productivity, or create operational or other challenges, any of which could harm our business and results of operations.
The economic uncertainty caused by the COVID-19 pandemic may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. We have committed, and we plan to continue to commit, resources to grow our business, including to expand our international presence, employee base, and technology development, and such investments may not yield anticipated returns, particularly if worldwide business activity continues to be impacted by COVID-19. The duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at this time, and if we are not able to respond to and manage the impact of such events effectively, our business may be harmed.
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We have historically relied, and expect to continue to rely, on a small number of partners and their respective affiliates for a significant percentage of our revenue. The loss of all or a significant part of their business or an adverse change in the terms of our agreements could significantly harm our reputation, business, financial condition and results of operations.
In 2020, our largest digital property, Microsoft and affiliates, accounted for approximately 20% of our gross revenues generated from advertisers on digital properties, and our top five digital properties accounted for approximately 30% of our gross revenues. We have long-term contracts with our large digital properties, which, in general, contain minimum guarantee requirements. The typical contract length with our large digital properties is over two years (without any right by these properties to terminate earlier than that absent cause).
The loss of all or a significant part of our business with our largest partners, particularly Microsoft and its affiliates, or unfavorable changes in the terms of our agreements with these partners could significantly harm our reputation, business, financial condition and results of operations.
We do not have long-term commitments from our advertisers, and we may not be able to retain advertisers or attract new advertisers that provide us with revenue that is comparable to the revenue generated by any advertisers we may lose.
Most of our advertisers do business with us by placing insertion orders for particular advertising campaigns. If we perform well on a particular campaign, then the advertiser may place new insertion orders with us for additional advertising campaigns. We rarely have any commitment from an advertiser beyond the campaign governed by a particular insertion order and, even then, each particular insertion order may not be completed since advertisers can typically terminate a campaign at any time on twenty-four hours’ notice. As a result, our success is dependent upon our ability to outperform our competitors and win repeat business from existing advertisers, while continually expanding the number of advertisers for whom we provide services. In addition, it is relatively easy for advertisers to seek an alternative provider for their campaigns because there are no significant switching costs. In addition, advertising agencies, with whom we do business, often have relationships with many different providers, each of whom may be running portions of the same campaign. Because we generally do not have long-term contracts, it may be difficult for us to accurately predict future revenue streams. We cannot provide assurance that our current advertisers will continue to use our solutions, or that we will be able to replace departing advertisers with new advertisers that provide us with comparable revenue.
We may not be able to retain digital properties or attract new digital properties that provide us with digital space that is sufficient for our volume of sponsored content or comparable to the digital space provided by any digital properties we may lose.
We do business with our partners by allowing them to share in the revenues we receive from advertisers from campaigns that are placed on their digital properties. If the content we place on the digital property is successful, and the partner is satisfied with our performance and ability to generate revenue, the digital property partner may continue to want us to place content on their website. Alternatively, if we cannot maintain the quality of the content, digital property satisfaction with our platform may decrease. As our advertiser content may appear on multiple digital properties, any decrease in quality may rapidly affect many digital properties in a short period of time. Our commitments from digital properties are for various periods of time, but our success is dependent upon our ability to successfully execute campaigns using available digital space and maintaining partner satisfaction, while continually expanding the number of digital properties from whom we purchase digital space as needed to meet content volume. In addition, after expiration of our agreements, it is easy for digital properties to seek an alternative supplier of content for their digital space because there are no switching costs. We also face a risk that digital property contract renewals decrease our margins as digital properties may seek to negotiate a higher revenue share. Thus, we cannot provide assurance that our current partners will continue to want us to place content on their digital properties, or that we will be able to replace departing digital properties with new digital properties that provide us with sufficient or comparable digital space. In addition, certain trends in the industry designed to achieve a different user experience may significantly impact our business. For example, a partner may redesign its digital property causing us to have less real estate for our content or placing us in less profitable locations of the website.
If our access to quality digital properties or content from advertisers is diminished or if we fail to acquire new content, our revenue could decline and our growth prospects could be impeded.
We must maintain a consistent supply of attractive content and quality digital properties on which we place content. If our access to attractive content diminishes, our ability to pay digital properties will diminish, and if access
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to quality digital properties diminishes then advertisers may not want to work with us. Thus, our success depends both on our ability to secure quality content and digital real estate.
The amount, quality and cost of supply available to us can change over time. Our digital properties’ contracts are for various periods. As a result, we cannot provide any assurance that we will have ongoing access to a consistent supply of quality digital real estate. Moreover, the number of competitors in our industry is substantial and continues to increase, which could negatively affect the terms of doing business with our digital property partners and ultimately our gross margin. If we are unable to compete favorably for digital properties, we may not be able to place content at competitive rates or find alternative sources of supply with comparable traffic patterns and consumer demographics in a timely manner. Similarly, if we are unable to maintain a consistent supply of quality content from advertisers for any reason, our business, digital property partners retention and loyalty, financial condition and results of operations would be harmed.
If we are successful in attracting more advertising inventory from digital properties than we can satisfy with demand from advertisers, our relationship with certain digital properties, our revenues and our business could be adversely impacted.
Our business model depends on our ability to coordinate the supply of advertising inventory from our digital property partners with demand for that inventory from advertisers. Any material failure to effectively maintain a sufficient number of advertisers relative to the inventory we have available could cause digital properties not to utilize our platform or impair Taboola’s AI’s ability to accurately predict user engagement. As a result, our relationships with certain digital properties, our revenues and our business could be adversely impacted.
If Taboola fails to maintain the quality of content or to prevent low quality, offensive or other non-compliant content from appearing on the digital properties, we could lose digital properties and advertisers, which could cause our results of operations and revenues to decline.
Advertiser and digital property satisfaction with our solution depends on our ability to place high quality advertiser content with content from digital properties that is well-suited to the advertiser’s product or service. If we are unable to keep our advertisers’ content from being placed with low quality, offensive or other non-compliant editorial content, or if we are unable to keep low quality, offensive or other non-compliant ads off of our network of digital properties, our reputation and business may suffer. As we grow our business to serve a larger number of advertisers and digital properties, it could become more challenging to prevent low quality, offensive or other non-compliant content from being shown. In addition, the categories of content that our digital properties accept may change over time and as these categories are removed from our inventory, we could suffer a decrease in cost-per-click and overall revenue. If we are unable to maintain the quality of our advertiser and digital properties, our reputation and business may suffer and we may not be able to retain or secure additional advertiser or digital property relationships.
Historically, the majority of our agreements with digital properties have typically required them to provide us with exclusivity for the term of the agreement. To the extent that such exclusivity is reduced or eliminated for any reason, including due to changes in market practice or changes in or in response to laws, rules or regulations, digital properties could elect to implement competitive platforms or services that could be detrimental to our performance, thereby reducing our revenues and harming our business.
Although the majority of our agreements with digital properties have historically required digital properties to provide us with exclusivity for the term of the agreement, there is no guarantee that we will be able to continue to obtain such exclusive arrangements or to renew existing arrangements on similar terms in the future. To the extent that such exclusivity is reduced or eliminated for any reason, including due to changes in market practice or changes in or in response to laws, rules or regulations, our partners could elect to implement other platforms or services on their digital properties or to seek out other third parties with which to do business, which could be detrimental to our performance, thereby reducing our revenues and having an adverse effect on our business.
If we fail to detect fraudulent clicks, including non-human traffic, serve advertisements on undesirable websites, or serve content that is inappropriate to certain of our digital properties, our reputation will suffer, which would harm our brand and reputation and negatively impact our business, financial condition and results of operations.
Our business depends in part on providing our advertisers and digital properties with a service that they trust, and we have contractual commitments to take reasonable measures to prevent click fraud or distributing content on undesirable digital properties. We use proprietary technology to detect click fraud and block inventory that we know
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or suspect to be fraudulent. Preventing and combating fraud requires constant vigilance, and we may not always be successful in our efforts to do so. In addition, as we continue to improve our click fraud detection mechanisms, we may find that a portion of our traffic is the result of click fraud, and eliminating this fraudulent traffic would reduce our revenues. We also use proprietary technology to prevent our advertisers’ content from appearing on undesirable digital properties, but we may not be successful in doing so, which would harm our relationship with advertisers. Any of these things would harm our brand and reputation and negatively impact our business, financial condition and results of operations.
Our platform and business are subject to a wide variety of risks from individuals from inside and outside our company. Our policies and procedures may be inadequate to protect us from material losses or other harm caused by these bad actors, which could negatively impact our business, results of operations and reputation.
Our platform and business are subject to a wide variety of risks from individuals both inside and outside our company. We have established policies and procedures to manage our exposure to risk, including risks arising from the actions of our employees. These policies may not be adequate or effective in managing our future risk exposure or protecting us against unidentified or unanticipated risks. Although we regularly update our policies and procedures, including with respect sanctions, bribery, money laundering and insider trading, we may fail to predict future risks due to rapid changes in the market and regulatory conditions and in new markets we enter. Although we have established internal controls to ensure our risk management policies and procedures are adhered to by our employees as we conduct our business, our internal controls may not effectively prevent or detect any non-compliance of our policies and procedures. In particular, these measures may not adequately address or prevent all illegal, improper, or otherwise inappropriate activity from occurring and such conduct could expose us to liability, including through litigation, or adversely affect our brand or reputation. Further, any negative publicity related to the foregoing, whether such an incident occurred on our platform or on our competitors’ platforms, could adversely affect public perception of our industry as a whole, which could negatively affect demand for platforms like ours, and potentially lead to increased regulatory or litigation exposure. Any of the foregoing risks could negatively impact our business, results of operations and reputation.
Our business depends on strong brands and well-known digital properties, and failing to maintain and enhance our brands and well-known digital properties would hurt our ability to expand our number of advertisers and digital properties.
Building and maintaining market awareness, brand recognition and goodwill in a cost-effective manner is important to our overall success in achieving widespread acceptance of our existing and future solutions. In particular, our business depends on access to strong brands and well-known digital properties, such as prominent media outlets, and failing to maintain and enhance our relationships with such brands and digital properties would hurt our ability to strengthen our own brand and to expand our current number of advertisers and digital properties. Our efforts in developing our brand may be hindered by the marketing efforts of our competitors, to the degree our competitors are able to decrease the number of high-profile digital properties we are able to work with. Alternatively, if a significant number of well-known digital properties ceased to do business with us due to changing market conditions or for other reasons, our own brand image and reputation could suffer and our business and results of operations could be adversely affected.
The widespread use of technologies that can block or limit the display of our ads could adversely affect our financial results and business.
Technologies have been developed, and will likely continue to be developed, that can block the display of our ads or content or block our ad measurement tools, particularly for advertising displayed on personal computers. We generate substantially all of our revenue from advertising, including revenue resulting from the display of ads via our platform on personal computers. Revenue generated from the display of ads on personal computers has been impacted by these technologies from time to time. As a result, these technologies may have an adverse effect on our financial results and, if such technologies continue to proliferate, in particular with respect to mobile platforms, our future financial results may be harmed.
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Our business depends on continued and unimpeded access to the Internet and digital properties by us and our users. Internet access providers, device manufacturers, browser developers or owners of digital properties may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to significant degradation of our service or additional expenses and the loss of users and advertisers.
Our products and services depend on the ability of consumers to access the Internet. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers may take measures that could degrade, disrupt, or increase the cost of user access by restricting or prohibiting the use of their infrastructure to support our platform, by charging increased fees to us or our users, or by providing our competitors preferential access. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by internet access providers; however, substantial uncertainty exists in the United States and elsewhere regarding such protections. For example, in 2018 the United States Federal Communications Commission repealed net neutrality rules, which could permit internet access providers to restrict, block, degrade, or charge for access. In addition, our platform may be subject to government-initiated restrictions or blockages. COVID-19 has also resulted in quarantines, shelter in place orders, and work from home directives, all of which have increased demands for internet access and may create access challenges. These could result in a decrease of users interacting with our platform, and could impair our ability to attract new advertisers and digital properties.
In addition, we rely on data signals from user activity on websites that we do not control in order to deliver relevant and effective ads on behalf of our advertisers. Our advertising revenue is dependent on targeting and measurement tools that incorporate these signals, and any changes in our ability to use such signals will adversely affect our business. For example, legislative and regulatory changes, such as the GDPR and CCPA, may impact our ability to use such signals in our ad products. In addition, mobile operating system and browser providers, such as Apple and Google, have announced product changes as well as future plans to limit the ability of application developers to use these signals to target and measure advertising on their platforms. These developments may limit our ability to target and measure the effectiveness of ads on our platform, and any additional loss of such signals in the future will adversely affect our targeting and measurement capabilities and negatively impact our advertising revenue.
Large and established internet and technology companies may be able to independently transform the marketplace for data and native advertising and significantly impair our ability to operate.
Large and established internet and technology companies such as Amazon, Apple, Facebook and Google may have the power to significantly change the very nature of the internet display advertising marketplace, and these changes could materially disadvantage us. For example, Amazon, Apple, Facebook and Google have substantial resources and have a significant share of widely adopted industry platforms such as web browsers, mobile operating systems and advertising exchanges and networks. In addition, these or other companies may bundle other services alongside the services that compete with our solutions, thus potentially creating a more competitive platform than ours. Therefore, these companies could leverage their position to make changes to their web browsers, mobile operating systems, platforms, exchanges, networks or other products or services that could be significantly harmful to our business and results of operations.
From time to time certain of our digital properties, typically small and medium digital properties, have, and in the future may continue to, violate the terms of their agreements with us by depriving us of their contractually required advertising inventory.
If a significant number of these digital properties violate their agreements, it could be impractical for us to pursue remedies against all of them and as a result we may lack sufficient or timely advertising inventory for our advertiser clients. As a result, advertisers may be less likely to contract with us in the future. The combined effect of this disruption to our anticipated advertising inventory, and related supply and demand dynamics, could have an adverse effect on our revenue, business operations and reputation.
We may invest in or acquire other businesses, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations.
As part of our business strategy, we have made and may make future investments in or acquisitions of complementary companies, products or technologies. These activities involve significant risks to our business. We may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on
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favorable terms, if at all. If we do complete acquisitions, they may not ultimately strengthen our competitive position. Any acquisitions we complete could be viewed negatively by our partners and clients, which could have an adverse impact on our business. In addition, if we are unsuccessful at integrating employees or technologies acquired, our financial condition and results of operations, including revenue growth, could be adversely affected. Any acquisition and subsequent integration will require significant time and resources. We may not be able to successfully evaluate and use the acquired technology or employees, or otherwise manage the acquisition and integration processes successfully. We will be required to pay cash, incur debt and/or issue equity securities to pay for any such acquisition, each of which could adversely affect our financial condition. Our use of cash to pay for acquisitions would limit other potential uses of our cash, including investments in our sales and marketing and product development organizations, and in infrastructure to support scalability. The issuance or sale of equity or convertible debt securities to finance any such acquisitions would result in dilution to our stockholders. If we incur debt, it would result in increased fixed obligations and could also impose covenants or other restrictions that could impede our ability to manage our operations.
If we do not effectively grow and train our sales team and account managers, we may be unable to add new digital properties and advertisers or increase sales to our existing digital properties and advertisers, and our business would be adversely affected.
We continue to be substantially dependent on our sales team and account managers to obtain new digital properties and advertisers and to drive sales from our existing digital properties and advertisers. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. New hires require significant training and it may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, if we continue to grow rapidly, a large percentage of our sales team will be new to the company and our solutions. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new digital properties and advertisers or increasing sales to our existing digital property and advertiser base, our business would be adversely affected. Finally, managing our sales team and account managers, particularly in light of our growth, and enforcing compliance with our sales policies is a challenge for us.
If we do not effectively maintain and grow our research and development team with top talent, including employees who are trained in artificial intelligence, machine learning and advanced algorithms, we may be unable to continue to improve on our artificial intelligence, our performance could decline and we could lose digital properties and advertisers, which could cause our results of operations and revenues to decline.
Our future success depends on our ability to continue to attract, retain and motivate highly skilled employees, software engineers and other employees with the technical skills in artificial intelligence, machine learning and advanced algorithms that will enable us to deliver effective advertising and content solutions. Competition for highly skilled employees in our industry is intense, in particular in the fields of artificial intelligence and data science, and we expect certain of our key competitors, who generally are larger than us and have access to more substantial resources, to pursue top talent even more aggressively.
We may be unable to attract or retain such highly skilled personnel who are critical to our success, which could hinder our ability to keep pace with innovation and technological change in our industry or result in harm to our key advertiser and digital property relationships, loss of key information, expertise or proprietary knowledge and unanticipated recruitment and training costs. The loss of the services of such key employees could make it more difficult to successfully operate our business and pursue our business goals.
Our growth depends, in part, on the success of our strategic relationships with third parties, including ready access to hardware in key locations to facilitate the delivery of our platform and reliable management of Internet traffic.
We anticipate that we will continue to depend on various third-party relationships in order to grow our business. We continue to pursue additional relationships with third parties, such as technology and content providers, content delivery networks, data partnerships, co-location facilities and other strategic partners. Identifying, negotiating and documenting relationships with third parties requires significant time and resources, as does integrating third-party data and services. Our agreements with providers of technology, computer hardware, co-location facilities, and
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content are typically non-exclusive, do not prohibit them from working with our competitors or from offering competing services and do not typically have minimum purchase commitments. Our competitors may be effective in providing incentives to third parties to favor their products or services over ours or to otherwise prevent or reduce purchases of our solutions. In addition, these third parties may go out of business, no longer offer their services to us or not perform as expected under our agreements with them, and we may have disagreements or disputes with such third parties, which could negatively affect our brand and reputation.
In particular, our continued growth depends on our ability to source computer hardware, including servers built to our specifications, and the ability to locate those servers and related hardware in co-location facilities in the most desirable locations to facilitate the timely delivery of our services. Disruptions in the services provided at co-location facilities that we rely upon can degrade the level of services that we can provide, which could harm our business. We also rely on our integration with many third-party technology providers to execute our business on a daily basis. We rely on a third-party domain name service, or DNS, to direct traffic to our closest data center for efficient processing. If our DNS provider experiences disruptions or performance problems, this could result in inefficient balancing of traffic across our servers as well as impairing or preventing web browser connectivity to our site, which could harm our business.
Our future success depends on the continuing efforts of our key employees, including our founder, and on our ability to hire, train, motivate and retain additional employees, including key employees.
Our future success depends heavily upon the continuing services of our key employees, including our founder and CEO, Adam Singolda, and on our ability to attract and retain members of our management team and other highly skilled employees, including software engineers, analytics and operations employees and sales professionals. The market for talent in our key areas of operations, including New York, Tel Aviv, California, Bangkok, Sao Paulo and London, is intensely competitive. Our competitors may provide more generous benefits, more diverse opportunities and better chances for career advancement than we do. Some of these advantages may be more appealing to high-quality candidates than those we have to offer. Any of our employees may terminate his or her employment with us at any time.
New employees often require significant training and, in many cases, take significant time before they achieve full productivity. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. In addition, as we move into new geographies, we will need to attract and recruit skilled employees in those areas.
Even if we are successful in hiring qualified new employees, we may be subject to allegations that we have improperly solicited such employees while they remained employed by our competitors, that such employees have improperly solicited other colleagues of theirs employed by the same competitors or that such employees have divulged proprietary or other confidential information to us in violation of their agreements with such competitors. If we are unable to attract, integrate and retain suitably qualified individuals, our business, financial position and results of operations would be harmed.
Our corporate culture has contributed to our success. If we cannot maintain it as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business could be harmed.
We are undergoing rapid growth and we intend to further expand our overall headcount and operations both domestically and internationally and through acquisitions, and we may not be able to do so while effectively maintaining our corporate culture. We believe our corporate culture has been a critical component of our success as we believe it fosters innovation, teamwork, passion for partners and clients and focus on execution, while facilitating knowledge sharing across our organization. As we grow and change, we may find it difficult to preserve our corporate culture, which could reduce our ability to innovate and operate effectively. In turn, the failure to preserve our culture could negatively affect our ability to attract, recruit, integrate and retain employees, continue to perform at current levels and effectively execute our business strategy.
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Many advertisers typically spend less in the first quarter and more in the fourth quarter of each calendar year. Our historical revenue growth has mitigated the impact of these seasonal fluctuations in advertising activity. If our growth declines or these typical advertising patterns become more pronounced, seasonality could have a material impact on our revenue, cash flows and operating results.
Our revenue, cash flow and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our advertiser clients’ spending on advertising campaigns. For example, many advertisers tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending and correspondingly to spend less in the first quarter. Moreover, advertising inventory in the fourth quarter may be more expensive due to increased demand for it. Our historical revenue growth has masked the impact of seasonality in the past, but if our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and results of operations from period to period.
We usually incur the cost of an advertiser’s campaign before we bill for services. Such advertisers may have or develop high-risk credit profiles, which may result in credit risk.
We usually incur the cost of an advertiser’s campaign before we bill for services. A portion of our advertiser-side business is sourced through advertising agencies, and we contract with these agencies as agent for a disclosed principal, which is the advertiser. Typically, the advertising agency pays for our services once it has received payment from the advertiser for our services. Our agreements with these agencies typically provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser.
In addition, contracting with advertisers who have or develop high-risk credit profiles, subjects us to credit risk. This credit risk may vary depending on the nature of the advertiser’s business and the advertiser’s monetization of the traffic generated. Any inability to collect costs we have advanced or other amounts due to us, including write-offs of accounts receivable, could have a materially negative effect on our results of operations.
We often pay our digital properties their share of the revenue generated by an advertiser’s campaigns whether or not we have received payment from the advertisers and even if we never receive payment from such advertiser. In addition, we agree with digital properties on a fixed cost for the digital space but a large portion of our revenue from advertisers is tied to the performance of the campaign. As a result, our results of operations and financial condition could be adversely impacted if we do not receive timely payment from our advertisers or if our campaigns do not perform as expected.
Risks Related to Laws and Regulations
We are a multinational organization faced with complex and changing employment regulation in many jurisdictions and are therefore subject to a large number of risks relating to our employees. Failure to appropriately manage these risks can result in a material disruption of our operations, revenues and business.
Various foreign and domestic labor laws govern our relationship with our employees and affect our operating costs. These laws include overtime and sick pay, paid time off, work scheduling, healthcare reform, unemployment tax rates, workers’ compensation rates and applicable local labor or works council laws. A number of factors could adversely affect our operating results, including additional government-imposed increases in overtime and sick pay, paid leaves of absence, mandated health benefits, and changing regulations from the National Labor Relations Board in the United States or similar agencies in other jurisdictions. Complying with any new legislation or reversing changes implemented under existing law could be time-intensive and expensive and may adversely affect our business.
We are a multinational organization faced with complex and changing laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user engagement, or otherwise harm our business.
We are subject to a variety of laws and regulations in the United States and other countries that involve matters central to our business, including privacy, data protection, content, competition, consumer protection, and other matters. The expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. For additional discussion of data privacy and data protection laws applicable to our business, see “Risk
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Factors—Risks Related to Laws and Regulations—Legislation and regulation of online businesses, including privacy and data protection regimes, could create unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our technology platform or business model, which could have a material adverse effect on our business.”
Laws and regulations of the countries and their legal subdivisions in which we operate or conduct business or in which our employees reside, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. For example, regulatory or legislative actions affecting the manner in which we display content to our users could adversely affect user growth and engagement. Such actions could affect the manner in which we provide access to our platform or adversely affect our financial results.
These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions, have in the past led to, and may in the future lead to, unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity and reputational harm, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices.
Legislation and regulation of online businesses, including privacy and data protection regimes, could create unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our technology platform or business model, which could have a material adverse effect on our business.
Government regulation could increase the costs of doing business online. U.S. and many other governments have enacted or are considering legislation and regulation related to online advertising to which we are or may become subject, and we expect to see an increase in legislation and regulation related to digital advertising, the collection and use of Internet user data and unique device identifiers, such as IP address or unique mobile device identifiers, and other data protection and privacy regulation. The regulatory environment related to privacy and data protection is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. Such legislation and regulation could affect the costs of doing business online, and could reduce the demand for our solutions or otherwise harm our business, financial condition and results of operations. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows. For example, a wide variety of provincial, state, national and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. While we generally have not collected data from Internet users that is traditionally considered personally identifiable data, such as name, email address, address, phone numbers, social security numbers, credit card numbers, financial or health data, we typically do collect and store IP addresses, other device identifiers that are or may be considered personal data in some jurisdictions or otherwise may be the subject of legislation or regulation.
For example, in the United States, various federal and state regulators, including governmental agencies like the Federal Trade Commission, or the FTC, have adopted, or are considering adopting, laws and regulations concerning privacy and data protection. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information (including device identifiers, IP addresses, cookies and geo-location), came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. Additionally, voters approved a new privacy law, the California Privacy Rights Act, or the CPRA, in November 2020. Beginning on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. State laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted.
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Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal data. For example, the GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data (including online identifiers and location data). EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
Evolving and changing definitions of personal data, within the EU, the United States and elsewhere, especially relating to classification of IP addresses, machine or device identifiers and other information, have in the past and could cause us in the future, to change our business practices, expend significant costs to modify our data processing practices or policies, distract management or divert resources from other initiatives and project, or limit or inhibit our ability to operate or expand our business. Data protection and privacy-related laws and regulations are evolving and could result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. While we currently take steps to avoid collecting personal data that would enable the direct identification of Internet users, we may inadvertently receive this information from advertisers or advertising agencies or through the process of delivering our service. Additionally, while we take measures to protect the security of information that we collect, use and disclose in the operation of our business, and to offer certain privacy protections with respect to such information, such measures may not always be effective. Our advertising clients or digital property partners have or may in the future impose new restrictions relating to the GDPR, the CCPA and other privacy and data protection laws and regulations with which we must adapt and comply. Our failure to comply with applicable laws and regulations, or to protect personal data, could result in enforcement or litigation action against us, including fines, sanctions, penalties, judgments, imprisonment of our officers and public censure, claims for damages by consumers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our business, financial condition and results of operations. Even the perception of privacy concerns, whether or not valid, could harm our reputation and inhibit adoption of our solutions by current and future clients and partners.
Potential “Do Not Track” standards or government regulation could negatively impact our business by limiting our access to the user data that informs the advertising campaign we run, and as a result could degrade our performance for our digital properties and advertisers.
As the use of cookies has received ongoing media attention in recent years, some government regulators and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their web browser, not to have their website browsing recorded. All the major Internet browsers have implemented some version of a “Do Not Track” setting. Microsoft’s Internet Explorer includes a “Do Not Track” setting that is selected “on” by default. However, there is limited guidance, consensus and industry standards regarding the definition of “tracking,” what message is conveyed by a “Do Not Track” setting and how to respond to a “Do Not Track” preference. We could face competing policy standards, or standards that put our business model at a competitive disadvantage to other companies that collect data from Internet users, standards that reduce the effectiveness of our solutions, or standards that require us to make costly changes to our solutions. The FTC has stated that it will pursue a legislative solution if the industry cannot agree upon a standard. “Do Not Track” has seen renewed emphasis from proponents of the CCPA, and the CCPA, in certain circumstances, requires browser-based or similar “do not sell” signals. If a standard is imposed by state or federal legislation, or agreed upon by standard setting groups, that requires us to recognize a “Do Not Track” signal and prohibits us from using data as we currently do, then that could hinder growth of advertising and content production on the web generally, and limit the quality and amount of data we are able to store and use, which would cause us to change our business practices and adversely affect our business.
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Potential regulation or oversight over native advertising disclosure standards could negatively impact our business by affecting click through rates, which in turn affects the profitability of our digital properties and advertisers.
As “native” advertising, or advertising content designed to blend in with editorial content, increases in popularity among advertisers, digital properties, marketers and regulators are still considering varying approaches and guidelines relating to the labelling of such content. In the United States, the FTC requires that all online advertising must meet a few basic principles: it must be truthful and not misleading, it must substantiate any express or implied claims, it cannot be unfair or deceptive, and any disclosures necessary to make an ad accurate must be clear and conspicuous. The FTC clarified those requirements in March 2013 with a document titled “Dot Com Disclosures: Information about Online Advertising.” Although open to interpretation, those guidelines suggested paid online ads must be disclosed and adequately labeled to users. In December 2013, the FTC held a workshop to discuss whether media outlets are adequately identifying sponsored stories. No clear answers were derived from the workshop, as the FTC did not offer specific guidance on exactly how that content should be labeled. However, failing to clearly disclose something material in an advertisement would, in the views of some participants, be a violation of Section 5 of the Federal Trade Commission Act of 1914. Also, in May 2019, the Interactive Advertising Bureau (IAB), a self-regulatory agency, released its “Native Advertising Playbook 2.0” with the aim of providing a framework for native advertising, including how to clearly and prominently disclose the material as an advertisement. The playbook explains that native advertising must plainly disclose that the ad has been paid for in a conspicuous manner, but does not provide much in the way of additional disclosure guidance. Similarly, self-regulatory bodies such as the National Advertising Division (“NAD”), the investigative unit of the advertising industry’s system of self-regulation administered by the Council of Better Business Bureaus, which has in the past year investigated several advertisers for their native advertising practices in the print and digital space as part of its routine monitoring program, has not provided specific guidance to digital properties and marketers. The NAD’s guidance has relied on the FTC’s advice to search engine companies, which emphasizes the need for visual cues, labels or other techniques to effectively distinguish advertisements in order to avoid misleading consumers, but does not specify what cues, labels or techniques should be used. In the past, both NAD and Advertising Standards Authority, the UK’s independent regulator of advertising, have handled complaints filed against us with respect to our labeling. While those complaints have since been resolved and we seek to comply with respect to the clear labeling rules and guidance issued by NAD and ASA, it is possible that the FTC or one of these self-regulatory bodies could disagree and find that our disclosures are not sufficiently clear or conspicuous to avoid misleading consumers and should be modified. Similar or more stringent standards and self-regulatory principals have been or could be implemented in other countries as well.
If we make mistakes in the implementation of such guidance, or our commitments with respect to these principles, we could be subject to negative publicity, government investigation, government or private litigation, or investigation by self-regulatory bodies or other accountability groups. Any such action against us could be costly and time consuming, require us to change our business practices, cause us to divert management’s attention and our resources and be damaging to our reputation and our business. Moreover, additional or different disclosures may lead to a reduction in end-user’s interaction with sponsored content we distribute resulting in reduced profitability to our digital properties and ourselves.
We are a multinational organization faced with complex and changing advertising regulation in many jurisdictions in which we operate, and we are obligated to comply with such advertising regulations in connection with the advertising we distribute on behalf of our advertiser clients. If we fail to comply with these advertising regulations we or our advertisers could be subject to liability or forced to reduce or suspend operations until we are able to comply, which could reduce our revenues.
We are subject to complex and changing advertising regulations in many jurisdictions in which we operate, and we are obligated to comply with such advertising regulations in connection with the advertising we distribute on behalf of our advertiser clients. For example, much of the federal oversight on digital advertising in the U.S. currently comes from the FTC, which has primarily relied upon Section 5 of the Federal Trade Commission Act, which prohibits companies from engaging in “unfair” or “deceptive” trade practices, including alleged violations of representations concerning privacy protections and acts that allegedly violate individuals’ privacy interests. If we or our advertiser clients are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to alter our business strategy, which would negatively affect our business, financial condition and results of operations.
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We are a multinational organization and could be held liable in some jurisdictions in which we operate for the content or advertisements that we distribute on behalf of our advertiser clients, which could expose us to damages or other legal liability.
Our platform allows our advertisers’ advertisements to be displayed on the digital properties of our partners. Although Section 230 of the Communications Decency Act provides immunity, subject to certain conditions, to certain online platforms from claims related to third-party content, the law relating to the liability of online service providers for others’ activities on their services may change. Congressional efforts to restrict the scope of the protections available to online platforms under Section 230, and our current protections from liability for third-party content in the United States, could decrease or change as a result. Claims may be brought against us for defamation, negligence, breach of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our platform.
We may be subject to claims by virtue of our involvement in hosting, transmitting or providing access to content created by third parties. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, or may require us to change our business in an adverse manner. If the content or ads displayed on our platform are found to be illegal under applicable local law, we may be exposed to fines, civil penalties or consent decrees for such violations of law, which could adversely affect our revenue, reputation and results of operations. In extreme cases, false advertising could lead not only to civil penalties and fines, but also allegations of criminal wrongdoing.
From time to time we are subject to litigation, administrative inquiries and similar governmental procedures, which may be extremely costly to defend, could result in substantial judgment or settlement costs or subject us to other remedies. Litigation and other disputes can also divert management’s attention from our operations and hurt our reputation.
From time to time we are involved in various legal proceedings or government investigations, including, but not limited to, actions relating to breach of contract, intellectual property infringement, competition law or other issues. For example, in April 2021, we became aware that the Antitrust Division of the U.S. Department of Justice is conducting a criminal investigation of hiring activities in our industry, including us. We are cooperating with the Antitrust Division. While there can be no assurances as to the ultimate outcome, we do not believe that our conduct violated applicable law. Claims may be expensive to defend, may divert management’s time away from our operations, and may affect the availability and premiums of our liability insurance coverage, regardless of whether they are meritorious or ultimately lead to a judgment against us. We cannot assure you we will be able to successfully defend or resolve any current or future litigation matters, in which case those litigation matters could have a material and adverse effect on our business, financial condition, operating results, cash flows, reputation and prospects.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions as a result of new taxes and related laws, which may materially affect our business and results of operations.
As a multinational organization, operating in multiple jurisdictions such as Israel, the United States, the European Union, United Kingdom, Turkey, Brazil, China, Japan, South Korea, India and Thailand, among others, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which may be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and results of operations. In addition, as internet commerce and globalization continue to evolve, increasing regulation by government authorities becomes more likely. Our business could be negatively impacted by the application of existing laws and regulations or the enactment of new laws applicable to digital advertising. The cost to comply with such laws or regulations could be significant, and we may be unable to pass along those costs to our clients in the form of increased fees, which may negatively affect our business and results of operation. We are subject to regular review and audit by Israeli, US and other foreign tax authorities. Although we believe our tax estimates are reasonable, the authorities in these jurisdictions could review our tax returns and impose additional taxes, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could materially affect our income tax provision, net income, or cash flows in the period or periods for which such determination and settlement is made.
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Our tax rate may vary significantly depending on our stock price.
The tax effects of the accounting for stock-based compensation may significantly impact our effective tax rate from period to period. In periods in which our stock price is higher than the grant price of the stock-based compensation vesting in that period, we will recognize excess tax benefits that will decrease our effective tax rate, while in periods in which our stock price is lower than the grant price of the stock-based compensation vesting in that period, our effective tax rate may increase. The amount and value of stock-based compensation issued relative to our earnings in a particular period will also affect the magnitude of the impact of stock-based compensation on our effective tax rate. These tax effects are dependent on our stock price, which we do not control, and a decline in our stock price could significantly increase our effective tax rate and adversely affect our financial results.
We could be required to collect additional sales, use, value added, digital services or other similar taxes or be subject to other liabilities that may increase the costs our clients would have to pay for our products and adversely affect our results of operations.
We collect value added and other similar taxes in a number of jurisdictions. One or more countries or U.S. states may seek to impose incremental or new sales, use, value added, digital services, or other tax collection obligations on us. A successful assertion by one or more U.S. states or foreign countries or change of law requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial liabilities, including taxes on past sales, as well as interest and penalties. Furthermore, certain jurisdictions, such as the United Kingdom, France, India and Italy have recently introduced a digital services tax, which is generally a tax on gross revenue generated from users or customers located in those jurisdictions, and other jurisdictions have enacted or are considering enacting similar laws. A successful assertion by a U.S. state or local government, or other country or jurisdiction that we should have been or should be collecting additional sales, use, value added, digital services or other similar taxes could, among other things, result in substantial tax payments, create significant administrative burdens for us, discourage potential customers from subscribing to our platform due to the incremental cost of any such sales or other related taxes, or otherwise harm our business.
The Israeli tax benefits we currently receive require us to meet several conditions and may be terminated or reduced in the future, which would likely increase our taxes, possibly with a retroactive effect.
Some of our operations in Israel, referred to as “Privileged Enterprise” for FY 2018-2019 and “Preferred Technological Enterprise” commencing FY 2020 carry certain tax benefits under the Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”). In order to be eligible for tax benefits under the Investment Law, our Privileged/Preferred Technological Enterprises must comply with various conditions set forth in the Investment Law, as well as periodic reporting obligations. If we do not meet the requirements for maintaining these benefits or if our assumptions regarding the key elements affecting our tax rates are rejected by the Israeli tax authorities, they may be reduced or cancelled and the relevant operations would be subject to Israeli corporate tax at the standard rate, which is 23% in 2018 and thereafter.
In addition to being subject to the standard corporate tax rate, we could be required to refund any tax benefits we have already received, plus interest and penalties thereon under this program or similar programs we have utilized in the past. Even if we continue to meet the relevant requirements, the tax benefits our current “Privileged/Preferred Technological Enterprise” receive may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes we pay would likely increase, as all of our Israeli operations would consequently be subject to corporate tax at the standard rate, which could adversely affect our results of operations. Additionally, if we increase our activities outside of Israel, for example, by way of acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefit programs. If Israel discontinues or modifies these programs and potential tax benefits, our business, financial condition and results of operations could be adversely affected.
Transfer pricing rules may adversely affect our corporate income tax expense.
Many of the jurisdictions in which we conduct business have detailed transfer pricing rules, which require contemporaneous documentation establishing that all transactions with non-resident related parties be priced using arm’s length pricing principles. The tax authorities in these jurisdictions could challenge our related party transfer pricing policies and as a consequence the tax treatment of corresponding expenses and income. International transfer pricing is an area of taxation that depends heavily on the underlying facts and circumstances and generally involves
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a significant degree of judgment. If any of these tax authorities were to be successful in challenging our transfer pricing policies, we may be liable for additional corporate income tax, and penalties and interest related thereto, which may have a significant impact on our results of operations and financial condition.
We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations, and any determination that we violated these laws could have a material adverse effect on our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law—2000 and possibly other anti-bribery and anti-money laundering laws in countries outside of the United States in which we conduct our activities. Compliance with these laws has been the subject of increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years. Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector. Although we endeavor to conduct our business in accordance with applicable laws and regulations, we cannot guarantee compliance.
Noncompliance with anti-corruption, anti-money laundering, export control, sanctions and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In addition, regulatory authorities may seek to hold us liable for successor liability for violations committed by companies in which we invest or that we acquire. As a general matter, enforcement actions and sanctions could harm our business, results of operations and financial condition.
Risks Related to Our Intellectual Property and Technology
Our proprietary rights may be difficult to enforce, particularly because in many instances we rely on trade secrets rather than patents or similar registered legal protections. This could enable others to copy or use aspects of our platform without compensating us, which could erode our competitive advantages and harm our business.
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the intellectual property laws of Israel, the United States and other countries, so that we can prevent others from using our inventions and proprietary information. If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology, and our business could be adversely affected. We rely on trademark, copyright, trade secret and confidentiality procedures and contractual provisions to protect our proprietary methods and technologies. We have not received any patents covering our proprietary methods or technologies.
Unauthorized parties may attempt to copy aspects of our technology or obtain and use information we regard as proprietary. We generally enter into confidentiality and/or license agreements with our employees, consultants, vendors and advertisers, and generally limit access to and distribution of our proprietary information. However, any steps taken by us may not prevent misappropriation of our technology and proprietary information. Policing unauthorized use of our technology is difficult. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the United States, and mechanisms for enforcement of our proprietary rights in such countries may be inadequate. From time to time, legal action by us may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement. Although we rely on trade secret laws to protect our intellectual property, we may encounter difficulties enforcing our rights given the lack of patent protection. Such litigation could result in substantial costs and the diversion of limited resources and could negatively
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affect our business, financial condition and results of operations. If we are unable to protect our proprietary rights, including aspects of our technology platform, we may find ourselves at a competitive disadvantage to others who have not incurred the same level of expense, time and effort to create and protect their intellectual property.
We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
Third parties may assert claims of infringement of intellectual property rights in proprietary technology against us or against our digital properties or advertisers for which we may be held liable or have an indemnification obligation. Our risk of third-party claims may be increased to the extent we rely on unaffiliated persons or firms, over whom we have less control than we would have over our own employees, to develop code. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from operating our business.
Although third parties may offer a license to their technology, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and ultimately may not be successful. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages, including treble damages if we are found to have willfully infringed such claimant’s patents or copyrights, royalties or other fees. Any of these events could seriously harm our business financial condition and results of operations.
Legal claims against us resulting from the actions of our advertisers or digital properties could damage our reputation and be costly to defend.
We receive representations from advertisers that the content we place on their behalf does not infringe on any third-party rights. We also rely on representations from our digital properties that they maintain adequate privacy policies that allow us to place pixels on their properties and collect data from users that visit those websites to aid in delivering our solutions. However, we do not independently verify whether we are permitted to deliver advertising to our digital properties’ Internet users or that the content we deliver is legally permitted. If any of our advertisers’ or digital properties’ representations are untrue and our advertisers or digital properties do not abide by foreign, federal, state or local laws or regulations governing their content or privacy practices, we could become subject to legal claims against us, we could be exposed to potential liability (for which we may or may not be indemnified by our advertisers or digital properties), and our reputation could be damaged. Even in those instances where our advertisers and digital properties do indemnify us, it is possible these entities may not be willing or able to cover the claims and we will be responsible for the cost of litigation or required to pay substantial damages.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with digital properties, advertiser and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our products, services, or other contractual obligations. The term of these indemnity provisions generally survives termination or expiration of the applicable agreement. Large indemnity payments would harm our business, financial condition and results of operations.
Our solution relies on third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict our ability to sell our platform.
Our platform, including our computational infrastructure, relies on software licensed to us by third-party authors under “open-source” licenses. The use of open-source software may entail greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open-source
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software we use. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar solutions with less development effort and time and ultimately put us at a competitive disadvantage.
Although we monitor our use of open-source software to avoid subjecting our products to conditions we do not intend, the terms of many open-source licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our services. Moreover, we cannot guarantee our processes for controlling our use of open-source software will be effective. If we are held to have breached the terms of an open-source software license, we could be required to seek licenses from third parties to continue operating our platform on terms that are not economically feasible, to re-engineer our platform or the supporting computational infrastructure to discontinue use of certain code, or to make generally available, in source code form, portions of our proprietary code, any of which could adversely affect our business, financial condition and results of operations.
We may experience cybersecurity breaches, attacks or threats, or other outages or disruptions of our services, including scheduled or unscheduled downtime, which could harm our brand and reputation and negatively impact our revenue and results of operations.
As we grow our business, we expect to continue to invest in technology services, hardware and software, including data centers, network services, storage and database technologies. Creating the appropriate support for our technology platform, including large-scale serving infrastructure and big data transmission, storage and computation infrastructure, is expensive and complex, and our execution could result in inefficiencies or operational failures and increased vulnerability to cyber-attacks or breaches, which, in turn, could diminish the quality of our services and our performance for our digital properties and our advertisers. Cyber-attacks could include denial-of-service attacks impacting service availability (including the ability to deliver ads) and reliability; the exploitation of software vulnerabilities in Internet facing applications; phishing attacks or social engineering of system administrators (tricking company employees into releasing control of their systems to a hacker); or the introduction of computer viruses, ransomware or malware into our systems with a view to steal confidential or proprietary data. Cyber-attacks of increasing sophistication may be difficult to detect and could result in the theft of our intellectual property and our data or our digital properties’ or advertisers’ data. In addition, we are vulnerable to unintentional errors as well as malicious actions by persons with authorized access to our systems that exceed the scope of their access rights, or unintentionally or intentionally alter parameters or otherwise interfere with the intended operations of our platform.
A hack into our system or a technology glitch may cause a catastrophic effect where a large number of digital properties will stop using our service in a short period of time. While we take measures to protect the security of the systems and information used in the operation of our business, and to implement certain privacy protections with respect to such information, such measures may not always be effective. The steps we take to increase the reliability, integrity and security of our systems as they scale may be expensive and may not prevent system failures, unintended vulnerabilities or other cybersecurity incidents, including those resulting from the increasing number of persons with access to our systems, complex interactions within our technology platform and the increasing number of connections with third party partners and vendors’ technology. Furthermore, because the methods of cyber-attack and deception change frequently, are increasingly complex and sophisticated, and can originate from a wide variety of sources, including nation-state actors, despite our reasonable efforts to ensure the integrity of our systems, we may not be able to anticipate, detect, appropriately react and respond to, or implement effective preventative measures against, all cybersecurity incidents. In addition to our own systems, we use third-party vendors to store, transmit and otherwise process certain of our confidential or proprietary data on our behalf. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any cybersecurity incident attributed to our service providers as they relate to the information we share with them. Although we contractually require these service providers to implement and use reasonable security measures, we cannot control third parties and cannot guarantee a security breach will not occur in their systems.
We may be required to expend significant capital and other resources to protect against, respond to, and recover from any potential, attempted, or existing cybersecurity incidents. As cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful. The inability to implement, maintain and upgrade adequate safeguards could have a material adverse effect on our results of operations, financial condition and cash flow. Operational errors or failures or successful
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cyber-attacks, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could result in damage to our reputation, loss of current and new digital properties or advertisers and other partners and clients, the disclosure of personal, confidential, sensitive or proprietary data, interruptions to our operations and distraction to our management, and significant legal, regulatory and financial liabilities and lost revenues, which could harm our business.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, failures or other cybersecurity-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows.
Defects, errors or failures in our technology platform, including our software and systems, could adversely affect our business, operating results and growth prospects.
We depend upon the sustained and uninterrupted performance of our technology platform to operate fundamental aspects of our business. If our technology platform cannot scale to meet demand, or if there are defects or errors in our execution of any of these functions on our platform, then our business could be harmed. Our software and systems are complex and may contain defects or errors, or may experience failures when implemented or when new functionality is released, as we may modify, enhance, upgrade and implement new software, systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends. Undetected errors and failures may occur, especially when new versions or updates are made. Despite testing by us, errors or bugs in our software have in the past, and may in the future, not be found until the software is in our live operating environment. Any defects, errors, failures or other similar performance problems or disruptions in our software or systems could materially and adversely affect our business, financial condition and results of operations. Defects, errors, failures or other similar performance problems or disruptions, whether in connection with day-to-day operations or otherwise, could damage our clients’ businesses and result in negative publicity, damage to our brand and reputation, loss of or delay in market acceptance of our solutions, increased costs or loss of revenue, loss of competitive position or claims by advertisers for losses sustained by them. In such an event, we may be required or choose to expend additional resources to help mitigate any problems resulting from defects, errors or failures in our software or systems. Alleviating problems resulting from defects, errors or failures in our software or systems could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of our business, any of which would adversely impact our financial position, results of operations and growth prospects. In addition, if we experience any defects, errors, failures or other performance problems, our partners could seek to terminate or elect not to renew their contracts, delay or withhold payment or make claims against us. Any of these actions could result in liability, lost business, increased insurance costs, difficulty in collecting accounts receivable, costly litigation or adverse publicity, which could materially and adversely affect our business, financial condition and results of operations. Additionally, our software utilizes open-source software and any defects or errors in such open-source software could materially and adversely affect our business, financial condition and results of operations.
We rely on third-party service providers for many aspects of our business, and any disruption of service experienced by such third-party service providers or our failure to manage and maintain existing relationships or identify other high-quality, third-party service providers could harm our business, results of operations and growth prospects.
We rely on a variety of third-party service providers in connection with the operation of our solutions. Any performance issues, errors, bugs or defects in third-party software or services could result in errors, defects or a failure of our solutions, which could materially and adversely affect our business, financial condition and results of operations. Many of our third-party service providers attempt to impose limitations on their liability for such performance issues, errors, bugs or defects, and if enforceable, we may have additional liability to our clients or to other third parties that could harm our reputation and increase our operating costs. Additionally, in the future, we might need to license other software or services to enhance our solutions and meet evolving client demands and requirements, which may not be available to us on commercially reasonable terms or at all. Any limitations in our
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ability to use or obtain third-party software or services could significantly increase our expenses and otherwise result in delays, a reduction in functionality or errors or failures of our solutions until equivalent technology or content is either developed by us or, if available, identified, obtained through purchase or licensed and integrated into our solutions, which could adversely affect our business. In addition, third-party software and services may expose us to increased risks, including risks associated with the integration of new technology, the diversion of resources from the development of our own proprietary technology and our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs, all of which may increase our expenses and materially and adversely affect our business, financial condition and results of operations. We will need to maintain our relationships with third-party service providers and obtain software and services from such providers that do not contain any errors or defects. Any failure to do so could adversely affect our ability to deliver effective solutions to our clients and adversely affect our business.
Risks Related to Being a Public Company
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies. As a public company, we are subject to significant obligations relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage such obligations. These obligations and scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.
It is possible that our internal control over financial reporting is not effective because it cannot detect or prevent material errors at a reasonable level of assurance. Our past or future financial statements may not be accurate and we may not be able to timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the price of our ordinary shares.
As a private company, we have not been required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes Oxley Act, or Section 404. As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing, implementing, testing and maintaining effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business and the economic and regulatory environments. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.
It is possible that our internal control over financial reporting is not effective because it cannot detect or prevent material errors at a reasonable level of assurance. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and adversely affect our operating results. In addition, we will be required, pursuant to Section 404, to furnish a report by our management on, among other things, the effectiveness of our internal control over financial reporting in the second annual report filed with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. In addition, pursuant to Section 404, we will be required to include in the annual reports that we file with the SEC an attestation report on our internal control over financial reporting issued by our independent registered public accounting firm.
Furthermore, as a public company, we may, during the course of our testing of our internal controls over financial reporting, or during the subsequent testing by our independent registered public accounting firm, identify deficiencies which would have to be remediated to satisfy the SEC rules for certification of our internal controls over financial reporting. As a consequence, we may have to disclose in periodic reports we file with the SEC significant
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deficiencies or material weaknesses in our system of internal controls. The existence of a material weakness would preclude management from concluding that our internal controls over financial reporting are effective, and would preclude our independent auditors from issuing an unqualified opinion that our internal controls over financial reporting are effective. In addition, disclosures of this type in our SEC reports could cause investors to lose confidence in the accuracy and completeness of our financial reporting and may negatively affect the trading price of our ordinary shares, and we could be subject to sanctions or investigations by regulatory authorities. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting, it could negatively impact our business, results of operations and reputation.
We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2021. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
As we are a “foreign private issuer” and intend to follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to Nasdaq rules for shareholder meetings quorums and rules requiring shareholder approval. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
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We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and could also make it more difficult for us to attract and retain qualified members of our board.
We continue to evaluate these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual reports and provide an annual management report on the effectiveness of control over financial reporting. Though we will be required to disclose material changes in internal control over financial reporting on an annual basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting.
We currently have limited accounting personnel and we have begun the process of evaluating the adequacy of our accounting personnel staffing level and other matters related to our internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. As a result, the market price of our ordinary shares could be negatively affected, and we could become subject to litigation including shareholder suits or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Risks Related to Our Ordinary Shares
Our share price may be volatile, and you may lose all or part of your investment.
The market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:
actual or anticipated fluctuations in our results of operations;
variance in our financial performance from the expectations of market analysts or others;
announcements by us or our competitors of significant business developments, changes in significant customers, acquisitions or expansion plans;
our involvement in litigation;
our sale of ordinary shares or other securities in the future;
market conditions in our industry;
changes in key personnel;
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the trading volume of our ordinary shares;
changes in the estimation of the future size and growth rate of our markets; and
general economic and market conditions.
In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our management’s attention and resources could be diverted.
An active trading market for our ordinary shares may not be sustained to provide adequate liquidity.
An active trading market may not be sustained for our ordinary shares. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling ordinary shares and may impair our ability to acquire other companies by using our shares as consideration.
The market price of our ordinary shares could be negatively affected by future issuances or sales of our ordinary shares.
Immediately following completion of the Business Combination and the other Transactions, we will have 213,228,286 ordinary shares outstanding, assuming no redemptions. Sales by us or our shareholders of a substantial number of ordinary shares, the issuance of ordinary shares as consideration for acquisitions, or the perception that these sales might occur, could cause the market price of our ordinary shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.
As of December 31, 2020, after giving pro forma effect to the Merger and the other Transactions, we would have had 32,150,000 shares available for future grant under our share option plans and 75,446,042 ordinary shares that were subject to share options and restricted share units. Of this amount, after giving pro forma effect to the Business Combination and the other Transactions, 59,958,770 would have been vested and exercisable as of December 31, 2020. Subsequent to December 31, 2020, we granted additional options and restricted share units to certain employees as more fully described in “Unaudited Pro Forma Combined Financial Information—Basis of Presentation” and “Management Following the Business Combination — Aggregate Compensation of Executive Officers and Directors”.
We do not expect to pay any dividends in the foreseeable future.
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business.
Our board of directors has sole discretion over whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. In addition, the Israel Companies Law imposes restrictions on our ability to declare and pay dividends. Payment of dividends may also be subject to Israeli withholding taxes.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our ordinary shares would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our results of operations fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
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Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act which may impose additional litigation costs on our shareholders.
Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act or the Federal Forum Provision. However, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act. While the Federal Forum Provision does not restrict the ability of our shareholders to bring claims under the Securities Act, nor does it affect the remedies available thereunder if such claims are successful, we recognize that it may limit shareholders’ ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs which may discourage the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies' organizational documents has been challenged in legal proceedings and there is uncertainty as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations.
Risks Relating to Our Incorporation and Location in Israel
Conditions in Israel could adversely affect our business.
We are incorporated under the laws of the State of Israel, and our principal research and development facilities, including our major data centers, are located in Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of its facilities, our ability to deliver products to advertisers could be materially adversely affected.
Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financial condition of Israel, could adversely affect our operations and product development, and could cause our sales to decrease.
In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, particularly if such call-ups include the call-up of members of our management. Such disruption could materially adversely affect our business, financial condition and results of operations.
Investors’ rights and responsibilities as our shareholders will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of non-Israeli companies.
We were incorporated under Israeli law and the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S. and other non-Israeli corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a
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shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company has a duty to act in fairness towards the company. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.
Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of the Business Combination may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of the Business Combination could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:
Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;
Israeli corporate law requires special approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;
Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;
our amended and restated articles of association to be effective upon the closing of the Business Combination divide our directors into three classes, each of which is elected once every three years;
our amended and restated articles of association to be effective upon the closing of the Business Combination generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision empowering our board of directors to determine the size of the board, the provision dividing our directors into three classes, the provision that sets forth the procedures and the requirements that must be met in order for a shareholder to require the Company to include a matter on the agenda for a general meeting of the shareholders and the provisions relating to the election and removal of members of our board of directors and empowering our board of directors to fill vacancies on the board, require a vote of the holders of 65% of our outstanding ordinary shares entitled to vote at a general meeting;
our amended and restated articles of association to be effective upon the closing of the Business Combination do not permit a director to be removed except by a vote of the holders of at least 65% of our outstanding shares entitled to vote at a general meeting of shareholders; and
our amended and restated articles of association to be effective upon the closing of the Business Combination provide that director vacancies may be filled by our board of directors.
Further, Israeli tax considerations may make potential transactions undesirable to us or some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including, a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.
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Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between the Company and its shareholders under the Companies Law and the Israeli Securities Law, which could limit its shareholders ability to brings claims and proceedings against, as well as obtain favorable judicial forum for disputes with the Company, its directors, officers and other employees.
Unless we agree otherwise, the competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law. Such exclusive forum provision in our amended and restated articles of association will not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of the Company will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholders’ ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage lawsuits against the Company, its directors, officers and employees. The foregoing exclusive forum provision is intended to apply to claims arising under Israeli Law and would not apply to claims for which the federal courts of the United States would have exclusive jurisdiction, whether by law or pursuant to our amended and restated articles of association, including claims under the Securities Act for which there is a separate exclusive forum provision in our amended and restated articles of association. See “—Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act which may impose additional litigation costs on our shareholders.”
General Risks
Fluctuations in the exchange rates of foreign currencies could result in currency transaction losses that negatively impact our financial results.
We currently have sales denominated in currencies other than the US dollar. In addition, we incur a portion of our operating expenses in British pounds, Euro, Israeli shekels, Turkish lira, Japanese Yen and Thai baht, among others. Any fluctuation in the exchange rates of these foreign currencies could negatively impact our business, financial condition and results of operations. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets. In addition, those activities may be limited in the protection they provide us from foreign currency fluctuations and can themselves result in losses.
Economic downturns and political and market conditions beyond our control could adversely affect our business, financial condition and results of operations.
Our business depends on the overall demand for advertising and on the economic health of our current and prospective advertisers. Economic downturns or instability in political or market conditions may cause current or new advertisers to reduce their advertising budgets. Adverse economic conditions and general uncertainty about economic recovery are likely to affect our business prospects. This could expose us to increased credit risk on advertiser insertion orders, which, in turn, could negatively impact our business, financial condition and results of operations. In addition, continued geopolitical turmoil in many parts of the world have, and may continue to, put pressure on global economic conditions, which could lead to reduced spending on advertising.
We may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our platform, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our existing stockholders. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and
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other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business could be adversely affected.
We are exposed to the risk of natural disasters, political events, war, terrorism and pandemics, each of which could disrupt our business and adversely affect our results of operations.
Events beyond our control could have an adverse effect on our business, financial condition, results of operations and cash flows. Disruption to our platform resulting from natural disasters, political events, war, terrorism, pandemics or other reasons could impair our ability to continue to provide uninterrupted platform service to our advertisers and digital properties. Similarly, disruptions in the operations of our key third-parties, such as data centers, servers or other technology providers, could have a material adverse effect on our business.
While we have disaster recovery arrangements in place, they have not been tested under actual disasters or similar events and may not effectively permit us to continue to provide our platform. If any of these events were to occur to our business, our business, results of operations, or financial condition could be adversely affected.
Expansion of current and new partners and clients in our existing international markets is important to our long-term success, and our limited experience in operating our business in certain locations increases the risk that our international operations will not be successful.
As of December 31, 2020, we have offices in Israel, the United States, the United Kingdom, Brazil, Turkey, Thailand, India, Japan, China, South Korea, Australia, Mexico, Germany, Spain and France. Expansion into new international markets requires additional management attention and resources in order to tailor our solutions to the unique aspects of each country. In addition, we face the following additional risks associated with our expansion into international locations:
challenges caused by distance, language and cultural differences;
longer payment cycles in some countries;
credit risk and higher levels of payment fraud;
compliance with applicable foreign laws and regulations, including laws and regulations with respect to privacy, consumer protection, spam and content, and the risk of penalties to our users and individual members of management if our practices are deemed to be out of compliance;
unique or different market dynamics or business practices;
currency exchange rate fluctuations;
foreign exchange controls;
political and economic instability and export restrictions;
potentially adverse tax consequences; and
higher costs associated with doing business internationally.
These risks could harm our international expansion efforts, which could have a materially adverse effect on our business, financial condition or results of operations.
Risks Related to ION and the Business Combination
Directors of ION have potential conflicts of interest in recommending that ION shareholders vote in favor of approval of the Merger Agreement and the transactions contemplated thereby, including the Business Combination, and approval of the other proposals described in this proxy statement/prospectus.
When considering the recommendation of the board of directors of ION that ION shareholders vote in favor of the approval of the Business Combination, ION shareholders should be aware that ION’s directors and executive officers, and entities affiliated with them, have interests in the Business Combination that may be different from, or in addition to, the interests of ION shareholders. These interests include:
the anticipated appointment of Gilad Shany, ION’s Chief Executive Officer, as a member of the board of directors of Taboola;
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the continued indemnification of former and current directors and officers of ION and the continuation of directors’ and officers’ liability insurance after the Business Combination;
the fact that the Sponsors and directors of ION have waived their right to redeem any of their Class A Ordinary Shares in connection with a shareholder vote to approve the Business Combination;
the fact that the Sponsors and directors of ION beneficially own or have an economic interest in ION Warrants that they purchased in a private placement prior to, or simultaneously with, the initial public offering of Class A Ordinary Shares (the “IPO”) for which they have no redemption rights in the event an initial business combination is not effected in the required time period;
the fact that the Sponsors and directors of ION paid an aggregate of $25,000 for Class B Ordinary Shares (i.e., the ION founder shares), which immediately prior to the Effective Time will convert into 6,468,750 Class A Ordinary Shares, subject to adjustment, and such securities will have a significantly higher value at the time of the Business Combination, estimated at approximately $          based on the reported closing price of $          per Class A Ordinary Share on NYSE on          , 2021;
the fact that the Sponsors and directors of ION paid $7,175,000 for the 7,175,000 ION Warrants that they purchased in a private placement, and each ION Warrant will be assumed by Taboola at the closing of the Business Combination and will be exercisable commencing 30 days following the closing of the Business Combination for one Taboola Ordinary Share at $11.50 per share; and
if the trust account is liquidated, including in the event ION is unable to complete an initial business combination within the required time period, ION Holdings 1, LP (the “ION Sponsor”) has agreed that it will be liable to ION if and to the extent any claims by a third party for services rendered or products sold to it, or a prospective target business with which it has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per Class A Ordinary Share and (ii) the actual amount per Class A Ordinary Share sold as part of the ION Units in the IPO held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per Class A Ordinary Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business that executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act.
These financial interests of ION’s officers and directors, and entities affiliated with them, may have influenced their decision to approve the Business Combination. You should consider these interests when evaluating the Business Combination and the recommendation of the proposal to vote in favor of the Business Combination and other proposals to be presented to ION shareholders.
If the PIPE Investment and the Secondary Purchases are not consummated and Taboola does not waive the Minimum Cash Condition, the Business Combination may be terminated.
As a condition to closing the Business Combination, the Merger Agreement provides that the amount in the trust account (after giving effect to ION shareholder redemptions) and the proceeds from the PIPE Investment and the Secondary Purchases must equal or exceed $450,000,000 (the “Minimum Cash Condition”). Since the amount in the trust account is less than $450,000,000, the funds from the PIPE Investment and the Secondary Purchases are required in order to consummate the Business Combination, unless such condition is waived. While the PIPE Investors and Secondary Investors have entered into the Subscription Agreements and the Secondary Purchase Agreements to purchase an aggregate of up to approximately $286,200,000 immediately prior to the Closing, there can be no assurance that such parties to the Subscription Agreements and the Secondary Purchase Agreements will perform their obligations under the Subscription Agreements and the Secondary Purchase Agreements. If the PIPE Investment and the Secondary Purchases are not consummated and Taboola does not waive the Minimum Cash Condition, the Business Combination may be terminated.
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Subsequent to the consummation of the Business Combination, Taboola may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.
Although ION has conducted due diligence on Taboola, there can be no assurance that this diligence revealed all material issues that may be present in Taboola’s businesses, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of ION’s or Taboola’s control will not later arise. As a result, Taboola may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if the due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Taboola’s preliminary risk assessment. Even though these charges may be non-cash items and not have an immediate impact on Taboola’s liquidity, the fact that Taboola reports charges of this nature could contribute to negative market perceptions about Taboola or its securities. In addition, charges of this nature may cause Taboola to violate net worth or other covenants to which it may be subject. Accordingly, any ION shareholders that choose to remain shareholders following the Business Combination could suffer a reduction in the value of their Taboola Ordinary Shares. Such ION shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by Taboola’s officers or directors of a fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation materials relating to the Business Combination contained an actionable material misstatement or material omission.
Taboola may redeem your unexpired Taboola Warrants received in exchange for your ION Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your ION Warrants or Taboola Warrants worth less.
Under the terms of the public ION Warrants, ION will have the ability to redeem outstanding public ION Warrants at any time after they become exercisable and prior to their expiration. The Taboola Warrants to be issued in exchange for outstanding ION Warrants are expected to be exercisable 30 days after the closing of the Business Combination. When the Taboola Warrants become redeemable by Taboola, Taboola may exercise the redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Taboola Warrants could force holders (i) to exercise the Taboola Warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) to sell the Taboola Warrants at the then-current market price when the holder might otherwise wish to hold its Taboola Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Taboola Warrants are called for redemption, is likely to be substantially less than the market value of the Taboola Warrants. The Taboola Warrants exchanged for ION Warrants that were issued in a private placement are not expected to be redeemable by Taboola so long as they are held by the Sponsors or their permitted transferees.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of, prior to the Business Combination, ION’s securities or, following the Business Combination, Taboola’s securities, may decline.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Class A Ordinary Shares prior to the consummation of the Business Combination may decline. The trading prices of the Class A Ordinary Shares at the time of the Business Combination may vary significantly from their trading prices on the date the Merger Agreement was executed, the date of this proxy statement/prospectus, or the date on which ION shareholders vote to approve the Business Combination. Because the number of Taboola Ordinary Shares to be issued pursuant to the Merger Agreement will not be adjusted to reflect any changes in the market price of the Class A Ordinary Shares, the trading price of Taboola Ordinary Shares issued in the Business Combination may be higher or lower than the values of these shares on earlier dates.
In addition, following the Business Combination, fluctuations in the trading price of Taboola Ordinary Shares could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for Taboola Ordinary Shares. Accordingly, the valuation ascribed to Taboola in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for Taboola’s securities develops and continues, the trading price of Taboola Ordinary Shares following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond Taboola’s control. Any of the factors listed below could have a material
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adverse effect on your investment in Taboola Ordinary Shares and Taboola Ordinary Shares may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of Taboola Ordinary Shares may not recover and may experience a further decline.
Factors affecting the trading price of Taboola Ordinary Shares may include:
actual or anticipated fluctuations in Taboola’s quarterly and annual financial results or the quarterly or annual financial results of companies perceived to be similar to Taboola;
changes in the market’s expectations about Taboola’s operating results;
success of competitors;
Taboola’s operating results failing to meet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by securities analysts concerning Taboola or the industries in which Taboola operates in general;
operating and share price performance of other companies that investors deem comparable to Taboola;
Taboola’s ability to market new and enhanced products and services on a timely basis;
changes in laws and regulations affecting Taboola’s business;
commencement of, or involvement in, litigation involving Taboola;
changes in Taboola’s capital structure, such as future issuances of securities or the incurrence of additional debt;
volume of Taboola Ordinary Shares available for public sale;
any major change in Taboola’s board or management;
sales of substantial amounts of Taboola Ordinary Shares by Taboola’s directors, executive officers or significant shareholders or the perception that such sales could occur;
general economic and political conditions such as recessions, interest rates, international currency fluctuations and acts of war or terrorism; and
occurrence of natural disasters, pandemics or other unanticipated catastrophes.
Broad market and industry factors may materially harm the trading price of Taboola Ordinary Shares irrespective of Taboola’s operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of Taboola Ordinary Shares, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to Taboola could depress its share price regardless of its business, prospects, financial conditions, or results of operations. A decline in the trading price of Taboola Ordinary Shares also could adversely affect Taboola’s ability to issue additional securities and its ability to obtain additional financing in the future.
ION’s Sponsors, directors, officers, advisors and their affiliates may elect to purchase Class A Ordinary Shares or ION Warrants from other ION shareholders, which may influence the vote to approve the Business Combination and reduce the public “float” of Class A Ordinary Shares.
ION’s Sponsors, directors, officers, advisors or their affiliates may purchase Class A Ordinary Shares or ION Warrants in privately negotiated transactions or in the open market either before or following the completion of the Business Combination, although they are under no obligation to do so. There is no limit on the number of securities ION’s Sponsors, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and the rules of the NYSE. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase Class A Ordinary Shares or ION Warrants in such transactions.
In the event that ION’s Sponsors, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from other ION shareholders who have already elected to exercise their redemption rights,
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such selling ION shareholders would be required to revoke their prior elections to redeem their Class A Ordinary Shares. The purpose of any such purchases of Class A Ordinary Shares could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining shareholder approval of the Business Combination or to satisfy a closing condition in the Merger Agreement that requires ION to have a certain amount of cash at the consummation of the Business Combination, where it appears that such requirement would otherwise not be met. In addition, the purpose of any such purchases of ION Warrants could be, among other things, to reduce the number of ION Warrants outstanding. Any such purchases of ION’s securities may result in the completion of the Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of Class A Ordinary Shares and the number of beneficial holders of ION’s securities may be reduced, possibly making it difficult to maintain the quotation, listing, or trading of ION’s securities on the NYSE or another national securities exchange, or a lack of liquidity, which could impair ION’s ability to fund its operations and adversely affect its business, financial condition and results of operations.
ION’s Sponsor, officers and directors have agreed to vote in favor of the Business Combination, regardless of how ION’s public shareholders vote. As a result, approximately 20% of the ION voting securities outstanding, representing the ION voting securities held by ION’s Sponsor, officers and directors, will be contractually obligated to vote in favor of the Business Combination subject to the terms and conditions of their respective support agreements.
ION’s Sponsor, officers and directors have agreed to vote their shares in favor of the Business Combination. ION’s Sponsor, officers and directors own all of the Class B Ordinary Shares outstanding prior to the Business Combination which, when converted to Class A Ordinary Shares will comprise approximately 20% of the Class A Ordinary Shares. Accordingly, it is more likely that the necessary shareholder approval for the Business Combination will be received than would be the case if the Sponsor agreed to vote their shares in accordance with the majority of the votes cast by other ION shareholders.
Even if ION consummates the Business Combination, there can be no assurance that Taboola Warrants received by holders of ION Warrants in the Business Combination will be in the money at the time they become exercisable or otherwise, and they may expire worthless.
The exercise price of the Taboola Warrants to be issued in exchange for the outstanding ION Warrants is $11.50 per Class A Ordinary Share. There can be no assurance that the Taboola Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the Taboola Warrants may expire worthless.
If ION is unable to complete the Business Combination with Taboola or another business combination by October 6, 2022 (or such later date as ION shareholders may approve), ION will cease all operations except for the purpose of winding up, dissolving and liquidating and ION will redeem its Class A Ordinary Shares and liquidate the trust account, in which case ION shareholders may only receive approximately $10.00 per share and its ION Warrants will expire worthless. In such event, third parties may also bring claims against ION and, as a result, the proceeds held in the trust account could be reduced and the per share liquidation price received by ION shareholders could be less than $10.00 per share.
Under the terms of the ION Articles, ION must complete the Business Combination or another business combination by October 6, 2022, or ION must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Class A Ordinary Shares and, subject to the approval of the remaining ION shareholders and the Board, dissolving and liquidating. In such event, third parties may bring claims against ION. Although ION has obtained waiver agreements from certain vendors and service providers (other than its independent auditors) it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the trust account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the trust account could be subject to claims that could take priority over those of other ION shareholders.
The ION Sponsor has agreed that it will be liable to ION if and to the extent any claims by a third party for services rendered or products sold to it, or a prospective target business with which ION has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of
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funds in the trust account to below the lesser of (i) $10.00 per Class A Ordinary Share or (ii) the actual amount per Class A Ordinary Share sold as part of the ION Units in the IPO held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under ION’s indemnity of the underwriters in the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. ION has not asked the ION Sponsor to reserve for its indemnification obligations, it has not independently verified whether the ION Sponsor has sufficient funds to satisfy such obligations, and it believes that the Sponsor’s only assets are securities of ION. As a result, if any such claims were successfully made against the trust account, the funds available for ION’s initial business combination and redemptions could be reduced to less than $10.00 per Class A Ordinary Share. In such event, ION may not be able to complete its initial business combination, and you would receive such lesser amount per Class A Ordinary Share in connection with any redemption of your Class A Ordinary Shares.
ION’s directors may decide not to enforce the indemnification obligations of the ION Sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to ION shareholders.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per Class A Ordinary Share or (ii) the actual amount per Class A Ordinary Share sold as part of the ION Units in the IPO held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per share due to reductions in the value of the trust assets, in each case less taxes payable, and ION Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, ION’s independent directors would determine whether to take legal action against the ION Sponsor to enforce its indemnification obligations.
While ION currently expects that its independent directors would take legal action on its behalf against the ION Sponsor to enforce its indemnification obligations to ION, it is possible that ION’s independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If ION’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to ION shareholders may be reduced below $10.00 per share.