Please ensure Javascript is enabled for purposes of website accessibility

Why Digital Turbine Stock Popped Today

By Evan Niu, CFA - Feb 26, 2021 at 4:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The on-device advertising specialist is acquiring AdColony to strengthen its business.

What happened

Shares of Digital Turbine (APPS -3.41%) popped by 14% today after the company said it would acquire AdColony. The deal is expected to bolster Digital Turbine's on-device advertising business.

So what

AdColony is a mobile ad platform that has 1.5 billion monthly active users worldwide. Digital Turbine has agreed to pay approximately $350 million to $375 million, which consists of $100 million in cash at closing, another $100 million in cash six months after closing, and earn-out payments of $150 million to $175 million contingent upon AdColony achieving certain performance targets in 2021. Digital Turbine will fund the deal with cash on hand, as well as borrowings under an existing credit facility.

Blue and green stock chart fluctuating

Image source: Getty Images.

"AdColony saw the secular tailwinds toward mobile, video and high-speed networks like 5G before most and has been able to capitalize on its vision," Digital Turbine CEO Bill Stone said in a statement. "The ability for Digital Turbine to utilize AdColony's unique mobile advertising solutions across our vast device distribution footprint will unlock significant new monetization opportunities for the combined company's platform offerings."

Now what

Digital Turbine did not quantify what types of synergies it hopes to realize from the deal but expects that the acquisition will be accretive to earnings in the first full year after the transaction closes, which is expected to occur in the current quarter. The deal needs to be approved by AdColony parent Otello's shareholders.

"We believe that Digital Turbine, with its extensive global relationships and distribution, will be uniquely positioned to benefit via the seamless integration of AdColony's mobile video advertising expertise and global brand advertiser awareness," said Otello CEO Lars Boilesen.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Digital Turbine, Inc. Stock Quote
Digital Turbine, Inc.
$25.48 (-3.41%) $0.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.