What happened
Shares of Telaria (TLRA) popped on Friday, rising as much as 11.7%. As of 1:23 p.m. EST, however, shares were up 8%.
The tech stock's gain adds to a sharp rise yesterday, when Telaria and The Rubicon Project (MGNI -3.71%) announced a definitive agreement to merge their businesses and create a single supply-side platform for publishers to optimize their ad inventory programmatically. Together, the two ad tech companies will make up the world's largest supply-side platform and have an important foothold in the fast-growing connected TV (CTV) advertising market.
Shares of Rubicon stock are also up, trading about 7% higher.
Shares of the two companies are likely rising Friday as investors continue to digest the implications of the stock-for-stock merger. In response to the merger agreement, Craig-Hallum analyst Jason Kreyer boosted his 12-month price targets for both stocks to levels that imply significant upside.
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So what
Kreyer lifted his price target on Rubicon Project from $12 to $13. He boosted his price target on Telaria from $11 to $14 -- a figure that implies more than 50% upside.
Together, the two companies will create "The Trade Desk of the supply side," Kreyer argues. By coming together, the two companies can offer publishers a one-stop shop to monetize ad yield programmatically, just as The Trade Desk has done on the demand side for ad buyers.
Now what
The companies believe that, when combined, they'll benefit from accelerated growth in CTV and "substantial" adjusted EBITDA. In addition, they forecast an annual run rate of $15 million to $20 million in cost savings.
The merger, which is subject to shareholder vote, regulatory approval, and other customary closing conditions, is expected to close sometime in the first half of 2020.
