Willie Sutton was known as an innovative bank robber using innumerable disguises and multiple scenarios. Of course he was credited with the quote about robbing banks “because that’s where the money was.” The “theft” of ironSource (IS) by Unity Software (NYSE:U) is not perhaps as colorful as some of Sutton’s robberies and escapes, but it is likely to prove far more lucrative.
A little more than a month ago I wrote an article published on SA extolling the virtues of IS as a business and as an investment. At the time, the shares were $2.31. On July 13, 2022, Unity and ironSource announced a “merger” with Unity as the surviving business. The transaction, at the time of the announcement was valued at $4.4 billion with Unity shares at a little less than $40. At the time of the announcement, Unity announced that it was again reducing guidance, and not terribly surprisingly the shares fell 17.4% the next day.
That drove the price of IS shares to around $3.30, although they have subsequently rebounded and now trade at $3.80 as of market close on Friday, July 22,2022, about a 5% discount to the value of the Unity shares to be received by ironSource shareholders. I suppose at one level that looks like a nice hit for my portfolio, and in a market that has been so cruel to growth shares perhaps it is. On the other hand, I used the word “theft” advisedly.
Simply put, ironSource shareholders, regardless of the premium over prior quotes they will receive, are contributing 38.5% of the revenue and more than 100% of the adjusted EBITDA to the combined entity. In exchange, they are receiving just 26.5% of the equity in the new venture. And ironSource is cash generating, and meeting its forecast; Unity is not.
While I will most certainly vote whatever shares I own at the time against the merger, I imagine that the transaction will go through because of the position that SPAC sponsor Thoma Bravo has in terms of voting power and because the IS founders/executives have shares with a 5:1 voting ratio and have announced they will vote for the merger. Of course it is always possible than another bidder can emerge, but this is a case where a significant part of the value of the company is in its management; a significant rationale for this merger is to deal with some of the business/technology issues that Unity has acknowledged and the management team at ironSource is key in that regard, in my opinion.
At the end of the day, investing is about looking at the future. This is an article that explores whether it makes sense to invest in either Unity or IS going forward. From this point forward, my expectation is that IS will trade as an arbitrage with Unity; as Unity, at least to me, would not be worth buying without the acquisition of ironSource given the uncertainties in the short term in its own business as well as the macro headwinds as outlined by some of the other companies in this space. I think the strategy of owning IS shares as a vehicle to invest in the new combined company makes best sense.
Based on Unity’s projections, and even using a somewhat optimistic scenario with regards to the recovery of the company’s monetization business, I would still find Unity shares too expensive to recommend. There are just far too many investment alternatives with better metrics available. But the combination of Unity with ironSource substantially changes the investment calculus. While a merger of this kind is never simple to execute, and there will be many challenges along the way, the potential rewards are substantial. The company has forecast that it will achieve a combined EBITDA of $1 billion by the end of 2024. At that point, it will probably have about 435 million fully diluted shares outstanding, and a net debt position of perhaps $700 million, depending on free cash flow through the end of 2024. Those kinds of numbers provide significant upside potential to the shares and that is why I have chosen to write an article that by its nature is going to be tendentious given the many uncertainties in handicapping a merger that is still in prospect.
This is not a simple story and I have seen more than a few mergers that seemed to be made in heaven unravel. But there is enough upside potential here for me to present the investment case recognizing that a risk of this kind is not going to be for all readers.
Before turning my attention to looking at the merger and its constituents at some level of detail, it seems relevant to write at least a little about the dire results from Snap (SNAP) and the results of Twitter (TWTR). I am certainly not going to enter the debate about whether or not the results of SNAP were entirely a function of a weak underlying on-line advertising market or a result of problems indigenous to Snap and Twitter. I note with amusement that the former head of Pimco, a bond fund has decided he has the answer to such a complex question. Unity and ironSource are part of the on-line, mobile advertising world. That world is seeing headwinds from a slowing of economic growth. The questions are how much? and for how long? The discussion of the impact of a recession on the on-line advertising world has been on-going for months now. ironSource in particular, already reduced its guidance back in May to take account of those headwinds. I am inclined to imagine that the same is true with regards to the updated guidance from Unity in the merger announcement. Trading these shares in this environment is going to be treacherous; investing much less so. The article has to do with evaluating the merger and not in handicapping how the current environment is creating a headwind for on-line advertising growth.
Unity was one of the shooting stars of the 2020 crop of IPO’s The company went public on Sept. 18th, 2020 at $52, and the shares started trading at $75. The shares ultimately traded as high as $210 last November before they began their descent to current levels. The company’s share price spike last November probably had something to do with the craze for all things Metaverse and this company, for better or worse, is involved in the technologies that are part of the Metaverse.
Unity is not a name on which I have written in the past. Basically, the share valuation was simply too high, even in the context of many much higher valuations for other IT vendors for me to develop an investment case. While the company was growing in the mid-40% range through the end of last year, it was some way from non-GAAP profitability. Part of the appeal of the company’s shares is that its software was used to create stunning 3D games and that finished results seemed to resonate significantly with some investors. It is lots easier to appreciate some of the creations built on Unity than it is to appreciate the results of using predictive analytics or automating sales processes.
When the company reduced guidance at the time it reported results in May, the company forecast that it would reach non-GAAP profitability in Q4, sooner than previously committed because of a considerable expense mitigation initiative. The press release in which it yet again reduced its revenue forecast was silent with regards to any change in the profitability forecast. There are obviously going to be some merger related expenses as the transaction moves to fruition; this is going to impact GAAP earnings, and probably have some impact on non-GAAP earnings as well.
Unity Technologies was launched in Copenhagen in 2004 as a game developer. While its game created at that time was not successful, the developers believed that the software tools that they had used could be offered commercially. In 2014, one of the company’s founders and its then CEO chose to step down and the current CEO, John Riccitiello, the former CEO of Electronic Arts (EA) becoming the CEO, a position he has held since that time. Over time, Unity morphed from selling its tools to game developers to its current business model which is subscription based for larger developers and essentially involves revenue shares for customers of the company's Operate solutions.
The company offers game developers and game architects tools to create and operate real-time 3D content, primarily games, but the platform is also used by automotive designers and film makers. The software that is created using its technology runs on everything from mobile phones, game consoles and tablets to virtual reality devices. This business segment is called Create. During the last reported quarter revenues, Create were $116 million, up 65% year on year, and 36% of the total. In announcing the merger agreement, the company suggested that Create has “continued to perform strongly. It also said that it had made progress in the Operate segment of its business, and that overall, Q2 results were at the upper end of its previous guidance range in terms of revenues.
Essentially, the company has been built to provide tools that facilitate the creation of games. The company has a service offering which developers use to develop complex, multiplayer games, and which can be used to manage game operations, optimize user acquisition and to maximize game monetization. Some high profile users of the solution include InnerSloty, Riot Games and Uken Games. The game development platform has been used by SYBO, Coatsink, Gameloft and Halfbrick amongst many other users.
Unity offers a Create solution called Digital Twins which is used by architects, in automotive design, by retailers and in the aerospace industry. It is a virtual copy of a physical asset which allows designers to simulate performance outcomes and issues as part of a design process. While the non-game creation component of Unity is relatively nascent, it has been experiencing very rapid growth, and while Unity has seen its share of problems as will be described, this non-game opportunity hasn’t been negatively impacted. Potentially this is a significant element of Unity’s business as described by the CEO
Today what I'm seeing is similar traction around essentially what they're thinking of as the metaverse, but what that really means is the next version of the Internet that allows them to do things like virtual try-ons, bring their boutiques into your home. It's a real-time 3D customer connection for complex products, for simple products, for fashion products, for technology products. And when we talked about it at the IPO it was interesting and we had good stories to tell. But this is -- it's changed a character in a pretty dramatic way. It's not just leaning in, it's jumping in and setting up camp. They all know they need this and it is coming in a huge way.
And here is a further comment by Mark Whitten, the Sr. VP of Create Solutions:
And you can look at that across whichever industry that you want to look at they tend to be focused across those different phases. Today, we've been and we continue to be strong in areas like architecture, engineering and construction, manufacturing, automotive, but we're also seeing a lot of significant growth in areas such as high end and luxury and retail and also in complex products. I think everything from elevators to boats and sort of, being able to build systems that support both the on-ramp of new customers through the operation of those products.
What's been very encouraging is that where we see our customers is they begin – they are beginning to staff dedicated engineering teams in these areas not just asking for professional services. And so what we see is that they see digital twins not as a point engagement a onetime thing but as a continuing capability. And that really speaks to how you think about not just the creation of an original digital twin, but its use over a lifetime to operate capabilities and the opportunity to create services and value add on that long term.
Will the Twins solution achieve this kind of acceptance as forecast by management? I don’t think any of this opportunity is actually built into estimates or expectations. If it happens this way, Unity will be a larger and more profitable business than anyone is likely to credit at this point. I might best describe it as lagniappe in terms of how it plays into the investment case.
Actually the largest segment of Unity’s business is Operate. Obviously much of Unity’s business is built on its tools that create games. But creating a game without monetizing that game really doesn’t provide a full blown solution for game developers. There is a very symbiotic relationship between game creation and monetization. Besides the obvious in that game creators, in order to build a business, have to find means to monetize their creations, Unity collects data from the games that have been created using its technology. This data is then used to develop offerings that help target in-game ads. Advertisers value ads that can be targeted exactly, and it is the relationship between the creation of the games, and their operation that notionally allows Unity to provide advertisers with an optimized solution. It is a rather complex technology that relies on machine learning that is used to create a bid for an ad. Unity Operate incorporates a solution called Unity Ads that basically allows for the integration of ads into and game using a variety of ad formats. While mobile game creation and mobile game downloads and playing are probably unaffected by a recession, most observers believe that macro issues will slow the growth of advertising revenues. While not called out specifically, I believe the reduced guidance that the company announced at the time it released its merger plans is a function of concerns regarding this headwind.
Unity Software shares are down by about 83% as of Friday, 7/22, from their high which was set just a bit more than 8 months ago. Even by the standards of this bear market, that is quite a lot, although, of course, there are certainly other tales of woe and worse declines to be seen in the IT space. Part of the issue is that the peak in share price was created in part by an extreme spike in a 6 week period from late September to mid-November 2021 as investor enthusiasm regarding metaverse stocks reached fever pitch. There definitely is no such investor sentiment these days, and that won’t be coming back any time soon in my opinion.
But the reality is that Unity’s app monetization solutions have run into significant problems. Specifically, the company’s Audience Pinpointer tool developed a software issue that lead to decreased accuracy, and with decreased accuracy the business model delivered less revenue. Just precisely what went wrong with the software that drives Audience Pinpointer wasn’t precisely identified when the problem was initially discussed during the course of the company’s conference call announcing Q1 earnings. Further, and unrelated to the first problem, the company’s data ingestion process was compromised because the company ingested bad data from a large customer. Ingesting bad data meant that the AI algorithms and the machine learning process stumbled significantly for the company.
As the company CEO, John Riccitiello put it, the company had been built more for growth and less for resiliency. It proved to be a poor strategic choice. Of course now that the issue has been identified, and has impacted users, the priority for Unity has been to address problems, rather than launching new features that had been expected to drive revenue. In particular, the company has had to delay a commercial launch of what is called mediation. For those unfamiliar with mediation in this context, it is a solution that allows developers/game publishers to manage multiple ad networks through a single software development kit. These days ad mediation is a central feature of monetizing mobile game revenues, and a vital component of any robust mobile game monetization solution. So delaying its launch is a significant issue for Unity and its developer customers. The company had actually announced its ad mediation offering back in October 2021, but it has not proceeded beyond what the company has described as “open beta.” In addition, the company has had to delay releasing some other significant features such as what is called header bidding, and other features of Audience Pinpointer.
The sum of the financial impact of these problems was initially projected to be $110 million or about 9% of the revenues that had been initially projected for the last 9 months of 2022. Subsequently, when the company announced its merger agreement with IS, it further reduced guidance. This guidance reduction was about 8% when compared to the prior consensus expectations for the 2 quarters that remain in 2022. The company didn’t elaborate on the guidance reduction beyond the headline; neither has it updated its earnings guidance. I am left to wonder just how much of this latest guidance reduction related to the product issues the company called out in May, and how much might be related to the headwinds currently rising in the on-line advertising space due to the deteriorating economic climate. In May, the company said that the impacts of the product issues on Unity’s revenue would be contained by the end of the year. Of course, as part of the merger announcement, the company didn’t try to project any expectations for 2023 since presumably, by that time, the merger will be complete and financial projections should project its impact.
I think it can be difficult for outsiders to analyze what went wrong with the software and the data ingestion process at Unity and just how long remediation might take and what will be the ultimate impact on customers. The company’s Pinpointer solution is basically the backbone of providing advertisers with a targeted audience since the advent of the Apple (AAPL) privacy policies and its elimination of the guts of its IDFA functionality. The issues uncovered were not the result of the latest changes in Apple’s IOS releases. The crux of the issue is whether Unity is still a trusted solution for developers. Here is some commentary on that subject from the company’s Senior Vice President of its Operate component, Ingrid Lesliyo:
Yeah. Matt this is the nature of machine learning-based products. We expect our recovery to go through several steps, in the sequence. The first is data rebuilding. The second is model training. And this is an iterative process that will drive better performance.
And the third, as our customers experience these improvements they will scale up their spend and monetization with us, we will then see the impact on our revenue. So these changes are incrementally built upon one another, as each step in this progression is the foundation for the next.
And, look, we're building this business for the long term, because we truly believe in this sector. The games advertising market, as John mentioned, will continue to grow. We have highly engaged players and professionally created content. This will always be attractive for advertising. And we know what we need to do to address this temporary challenge and we need to go through the motion to ensure the solid foundation.
And lastly, what I would mention is that, the beauty of this business is that no customers have a loss and the sales cycle is short. And for many of these developers, Unity has enabled them to achieve their vision and build the business that they have today. We have built a trusted brand and a reputation over the years such that when we deliver value we are confident that they will scale up their business with us again.
I don’t want to pretend I know if this scenario plays out or the tempo of the remediation. It is a significant risk that remains until there is data and substantiation that the Pinpointer software and data ingestion issues have been laid to rest.
At the time of the conference call in May, the CEO was fairly optimistic about business trends/advertising demand in the on-line advertising space.
So it's always difficult to be exactly precise on what happens in the macro world is, arguably more going on in the macro world today than there has been in a long time. I don't see any long-term impacts on engagement and the overall health of the monetization business with large or with small onto Unity as we recover. So we're expecting relative stability.
And let me give you a little bit of my long history in the game industry. Through virtually every major crisis, the game industry has grown. Through recession, the game industry has grown. Through catastrophes like 9/11, the game industry had strong weeks immediately following.
It is what people do when they're frustrated. It's what they do when they stay home because they can't travel. It's what they do to fill their time when they're stuck at home with COVID and it's the habit they pick up and they carry with them.
Can there be uneven quarters from time to time? They can, but they're exceptionally rare in the gaming industry. And it really is the habit that people pick up and maintain once they start. And it's one of those few things where, when people come under more pressure and more stress, they tend to gain more.
My guess, and again that is what it is, is that this latest guidance cutback, which is fairly significant, reflects a less sanguine view of demand, although, of course, the guidance reaffirmation from IS which is in the same market is an opposite signal. I believe that investors are going to have to wait until 8/9/22 when the company reports earnings and provides its outlook to see an updated view of how the company’s managers are looking at the market. Unity has been an exciting story since before it went public given how its technology has been used to create beautiful and realistic games that appeal to many. (Not this author-he is an old curmudgeon who doesn’t play games on his phone or tablet, but my younger friends show me these creations and tell me about their engagement).
The merger itself is an all-stock transaction. IS shareholders will receive .1089 shares of Unity for each share of ironSource they hold. IS had estimated that its diluted share count to be 1.15 billion in its last conference call, so that places the transaction value at about $4.5 billion. The ironSource shareholders will wind up with about 127 million shares of Unity, and the Unity outstanding share count will go to about 481 million. This means that IS shareholders will wind up holding 26.5% of the equity in the combined company. As a component of the overall transaction, Unity has announced a $2.5 billion share buyback over the next 24 months. It is said that this will reduce dilution - but self-evidently there is and will be no dilution to Unity shareholders - regardless of any share buyback. The company also announced that it would sell $1 billion of convertible notes to two of its significant venture investors, Silver Lake and Sequoia. These converts will bear interest at 2% and have a conversion price just less than $49/share. The conversion would result in issuing a bit more than 20 million shares or about 4% potential dilution. Assuming the company buys back $1 billion of shares in the 12 months after the merger closes, at about the current market price, then outstanding shares will be 456 million, and that is the number I will use in trying to establish some valuation parameters.
As mentioned earlier, I recently published an article detailing the various offerings of IS and the company’s growth drivers. Basically, the company offers gaming developers a set of monetization solutions which the company calls Sonic. Sonic includes solutions for gaming entrepreneurs to acquire users, to monetize their creations through mediation and bidding, and to analyze the usage of their games and the response to ads that are made on their platforms. This is an overlap with unity’s Create, although as mentioned, the Unity initiatives that encompassed bidding and ad mediation were set back significantly because of the need to prioritize the remediation of the software and data ingestion issues of that company’s Operate subsidiary.
ironSource is not in the game creation space; it doesn’t overlap with Unity in that area. It does, however, publish games through its Supersonic Studio, and that has been a very successful venture for the company. That is also an offering which is not duplicated by anything which Unity currently offers. The company also has an offering called Luna. The Luna platform was acquired a bit more than a year ago. The platform was already integrated with the Unity games creation engine. The platform has evolved so that it unifies every element of a marketing campaign for mobile games. Features include a Create Hub, which makes it easy to develop, edit and export ads, a control hub which allows users to manage a marketing campaign and a Data hub with connection to 40 different ad sources which is used as a source for the development of Business intelligence.
The company also offers Aura, a monetization solution for telecom operators which allows the operators to engage their users as they set up device, as they use devices, and at the end of the device lifecycle. Aura is another component of the IS offering that is not overlapped with Unity Software. Finally, about 10% of IS revenues is derived from the ironSource category Beyond Games. This is another category that isn’t currently offered by Unity.
It is a little daunting to try to present expectations for the combined company for 2023. Prior to the merger, I had been projecting that in the next 4 quarters, ironSource would generate revenues of about $870 million, with an adjusted EBITDA margin of 31%-32% and a free cash flow margin in the mid-high 20% range. Unity had been projected by the 1st Call consensus to generate revenues of $1.87 billion next year, although almost certainly the revised consensus will be less than that in the wake of the company’s lowered forecast for the current year coupled with the dreadful results posted by Snap on Friday morning. Basically, the Snap brush is tarring just about everything, deservedly so or not.
There are, self-evidently, significant potential revenue synergies in terms of cross sells and upsells. But realizing those is not likely to happen in the first few quarters after the merger given the many moving parts. Presumably, for example, the combined company will have only a single bidding solution and a single mediation platform, and those will come from ironSource. On the other hand, some ironSource users will want to adopt the Unity games creation engine. The combination of Unity’s Digital Twins and ironSource Beyond Games is also an interesting potential.
The company’s merger presentation suggests that the combined company will be based on 50% growth and 50% creation. Luna gets counted as creation as does Supersonic Studio, but exactly how the 50% ratio evolves is not terribly clear to me at this point. The company has identified $300 million of cost synergies, presumably beyond the cost containment program that Unity announced in May. As best as I can determine, the projected cost synergies would represent 12% or less of projected opex in 2024 when all of the integration benefits are to be realized.
One of the conceptual underpinnings of the merger is to provide game developers and other app creators and owners with a single integrated platform that is not matched by another company in the overall space. Basically, as the linked presentation developed to announce the merger shows, the strategy is to create a flywheel in which the game developers create games using Unity’s creation engine, publish games using ironSource and monetize those games using some combination of ironSource and Unity solutions.
The combination of the two companies will create a torrent of data, and data is the input that improves the result of audience segmentation tools, and helps to enhance mediation solutions. In addition, there will be a strategy to encourage the use of Unity Twins coupled with ironSource Beyond Games as part of a unified set of solutions.
While Unity is thought to have a greater than 60% market share in tools to create 3d games, there are more than a few alternatives in the space. Here is a link to a listing of some of the competitors creatives can consider in developing games. Many industry observers believe that Unreal offers a better graphics engine and an overall more sophisticated games creation process. Whether or not that is true, it hasn't hindered the growth of Unity Create, or prevented Unity from increasing its already high market share.
Unity and ironSource have been ranked two and three in terms of their app monetization solutions as this comparison shows, with AppLovin (APP), in the wake of its recent acquisition of MoPub from Twitter (TWTR), is ranked #1. Here is a further comparison between IS and UNTY In the wake of this merger, Unity’s share of the market should place it in the poll position. Here is the most recent analysis of the comparisons between Unity Ads and AppLovin's competitive offering
There are some app developers who weren’t pleased by the announcement of this merger plan. The initial response of the company CEO to that criticism was probably accurate but also unfortunate. I doubt that any substantial proportion of game developers will forsake Unity for competitors because it is a titan in app monetization, and I do believe that there are some app developers who will choose Unity simply because it has a… well a unified platform that is decently integrated.
The concept of a flywheel as a competitive strategy is attractive. It is something that many software companies try to achieve. But implementing a merger is hard work and execution is going to be critical. I certainly would discount potential valuation of the new company until there was some concrete evidence that their plans were being successfully implemented. It should be noted that the merger presentation didn’t provide any kind of revenue forecast which would establish some kind of benchmark in evaluating the progress of the company.
I expect that Unity will not be providing an outlook for the combined company until the merger is actually consummated. And to a certain extent, given everything that needs to happen both before and after the merger is finalized that is a reasonable position. But in order to try to make a recommendation, it is necessary to look at both some kind of expectation for the merged entity next year and to opine on just how reasonable the forecast of $1 billion of combined EBITDA as a run rate at the end of 2024.
I think it's inevitable, unless the economic outlook improves substantially over the coming few months, that Unity management, when it does provide guidance, is going to be exceptionally conservative in forecasting revenues. I have taken a stab at it here, but by no means do I think that my crystal ball is without many wisps of fog and cloud. It would be naïve to imagine otherwise.
Overall, I am guessing that a reasonable expectation for revenues of the combined company is about $2.5-$2.6 billion for calendar 2023. The component coming from IS is easier to forecast, but the return of Unity’s Operate component to reasonable growth is not easy to handicap and whether macro headwinds might have an effect on Create revenues is simply a guess at this point. As mentioned, I am estimating that 456 million shares of Unity will be outstanding after the merger, after the repurchase of 25 million shares funded through the issuance of the convertible, equates to a market capitalization of about $16.55 billion and an enterprise value of $15.55 billion. The latter figure has been adjusted for the cash balance of IS and for the $1 billion of convertible debt to be issued. So, my estimate of the EV/S at the current share price is about 6.1X. That valuation, is, of course, far below anything at which Unity shares have ever sold, but the inclusion of IS revenues which were valued at exceptionally modest levels, has a significant impact on the metric.
Can the combined company achieve $1 billion in adjusted EBITDA on a run rate basis within 2.5 years? The answer to that is somewhat dependent on revenue progression, and in turn some of that is going to be a function of revenue synergies. In a positive scenario, I expect the company’s revenue run rate by the end of 2024 will be at nearing $4 billion. So, given $300 million in cost synergies, and the ironSource business already at a 31%-32% adjusted EBITDA margin, it really seems quite reasonable.
In some ways, the answer to this question is pretty simple. If the company achieves $1 billion in adjusted EBIDA by the end of 2024 with consensus revenue growth estimates at that point of near 30%, the shares could double or triple in a reasonable market (i.e. a market environment less toxic than this is to growth companies.) I think there is a reasonable chance, but hardly a cinch, that it works out this way. Unity’s CEO has extensive industry experience, and the CEO of ironSource, Tomer Bar-Zeev has been putting mergers together in this space with significant success for more than a decade. Unity’s operational management including Marc Whitten, head of the Creative Solutions business and Ingrid Lestiyo, head of Operate Solutions, also have strong resumes.
I have little doubt that when the impending recession wanes - and despite the current pessimism, it will, advertisers will return to on-line advertising platforms with celerity, that creators will create, and that the creation of new shopping experiences using 3D technology will accelerate. Unity has the pieces to create a behemoth and to dominate its space. I assume that after the crisis currently impacting its own monetization engine, it will build at least as much for redundancy as for growth.
Overall, I see more opportunities than risks when evaluating the future of Unity. Perhaps I am being optimistic, but it appears as though Unity’s Twins offering coupled with the Beyond Games initiative of ironSource has the potential to be a significant contributor to growth beyond what is generally recognized at this point.
Unity shares are a long term story. There are many unknowns, and although some of them will become clearer between now and the time of the consummation of the merger the company will not provide guidance till then about what to expect from the combined company in 2023. That is likely to cause the shares to be range bound for the next several months. This is a treacherous market, and despite a recent bounce, it seems likely to remain so with all of the risks and uncertainties with regards to the global economy.
I expect that shares of IS will trade in tandem with those of Unity until the merger is completed. I don’t see any significant regulatory issues, given the intense competition in all areas of on-line advertising space. The principal shareholders of both companies are on record as supporting this company, so regardless of my own opinion regarding the “fairness” of the deal to IS shareholders, it's highly likely that it will reach fruition.
Depending on time horizons and risk tolerance, the opportunities are as great as most other companies in the IT world.
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