Outbrain raises funds worth $200 million. It is an ad-tech company that provides clickbait ads below news articles. Outbrain didn’t disclose the valuation of the company for this deal. The Baupost Group, a Boston-based hedge fund, is investing in the company. Outbrain filed for an initial public offering a few days ago. Today’s funding round should be the last traditional private investment round before going public.
Details on Outbrain raising funds
Outbrain has published an amended Form S-1 with some details about the deal. The Baupost Group has agreed to invest $200 million in “senior subordinated secured notes”.
Outbrains’ content recommendation widgets can be seen on popular news websites, such as CNN, Le Monde, and The Washington Post. They mostly feature sponsored links that lead to third-party websites.
“We are excited to announce this investment from The Baupost Group, who share our vision and commitment for our business, our team, and our future prospects” co-CEO David Kostman said in a statement.
.We are excited to announce this investment from The Baupost Group, who share our vision and commitment for our business, our team and our future prospects.David Kostman, co-CEO of Outbrain
Further details on the IPO filing
In its IPO filing, Outbrain reported $767 million in revenue for 2020 and $228 million in revenue for the first quarter of 2021 alone. In 2020, Outbrain managed to generate $4.4 million in net income. During Q1 2021, the company reported $10.7 million in net income.
“We proudly lead the recommendation space we created. We have bold plans for the future to continue delivering critical innovation to our premium media partners worldwide and expanding our powerful open web global advertising platform” Outbrain co-CEO Yaron Galai said in a statement.
The advertising market has recovered from the global health pandemic. Hence, there has been plenty of initial public offerings during the first half of 2021. Consequently, everything seems to be lining up for Taboola and Outbrain. This means it’s time to reach the next level and become a public company.
About the convertible notes
Those secured notes will likely become convertible notes following the initial public offering. the company wrote, “We intend to exchange the Notes for the Convertible Notes upon the consummation of this offering.”. There are some complicated terms associated with that transaction.
If the IPO goes well, The Baupost Group will be able to convert its convertible notes into common stock. The IPO prospectus had the following statement. “The initial conversion rate for the Convertible Notes per $1,000 principal amount of Convertible Notes will be a number of shares of common stock equivalent to a conversion price of 125% of the initial public offering price of our common stock.”
Finally, if The Baupost Group chooses to keep its convertible notes for a while, the hedge fund will earn interest. These will be 2.95% per year, or a bit more if the 5-year U.S. Treasury Rate is above 0.8%. Having a medium-term investor like The Baupost Group could stabilize Outbrain’s shares once they become tradable on the public market.