Recent coverage of Kubient, Inc. (NASDAQ: KBNT) alluded to the value of following a simple investment rule: follow the money. It's not a new strategy. In fact, billions of dollars have been made over the past few decades by those following just a single investor- Warren Buffet. Ironically, while many things have changed, that strategy which was good decades ago is still good today. Not only that, it's easier . Technology has put transparent SEC filings and reliable company news at the fingertips of any investor with a computer or smart device. Thus, while some still rely on chat rooms and social media platforms to fuel trading decisions, sticking to the basics still provides the best opportunity to not only outperform market averages but to survive an investment world full of fear, uncertainty, and doubt.
So, don't ignore the obvious. After all, voting with cash is still the best measure of confidence and means of endorsement an investor can give to a company. Thus, when a heat-seeker notification popped onto the screen showing that Saudi-based Mithuq Capital increased its stake in Kubient to a 10.1% interest, indeed, interest was born. That's not to say interest wasn't already there. Kubient has been on the investment radar screens for some time after developing its Audience Cloud ad-fraud prevention platform. Its capability has been described as everything from innovative to best-in-class at what it does. Furthermore, it targets a market where hundreds of billions of dollars are put to work daily without any objective measure of content control. More about that later.
The interest now is to discern why deep-pocketed Mithuq Capital, which already has a reported $300 million stake in another ad-tech company, Tremor (NASDAQ; TRMR), has taken such a liking to Kubient. Not to be overly presumptuous, but does Mithuq have bigger plans for Kubient or do they simply like what they see? Perhaps, best said, it's a combination of both.
Being Different Is Good
Millions of investment dollars indicate that's the likely case. Moreover, it's good to know that Mithuq isn't alone with a bullish bias. Insiders are increasing positions and now own about 41% of the outstanding stock. Not only are the two groups buying, but they also aren't selling. Not a single Form-4 was filed last year showing intent by any insider to sell shares. That's very uncommon for a small-cap stock. Thus, as the grip on shares tightens, it's understandable that KBNT stock is bucking the trend against a weakening NASDAQ market, which now has more than 25% of its NASDAQ-100 stocks quoted at bear market levels. Instead of following a wave of small and micro-caps lower, KBNT is holding its own, benefiting from an accumulation pattern providing plenty of impressive intraday gains of 5% or more.
The pattern shows something in particular. Investors are taking sizable bites of KBNT stock, and as share supply tightens, they are willing to pay more for each tranche they buy. So, while KBNT stock may not be holding daily highs, don't be fooled into thinking the stock isn't doing well. And, once market conditions inevitably turn bullish again, stocks that are strong in weak markets are the ones likely to explode higher when bullish sentiment puts the wind at their backs. Kubient is checking the right boxes to stay included on that list.
By the way, don't consider KBNT just a momentum trade, either. Although the specialized services Kubient provides is getting sector attention, Kubient is drawing interest by being the best at what they do.
A Best-in-Class Ad-Fraud Prevention Platform
Still, being the best at what they do is only one part of the value proposition. Being able to transform its technology into market dollars is the other. Kubient is showing it can do both by designing a platform they expect will transform the digital advertising industry and become the gateway to reliable and effective audience-based marketing through its next-generation cloud-based technology. By doing so, KBNT could become the go-to source to enable efficient marketplace liquidity for buyers and sellers of digital advertising, which puts billions of potential revenue dollars into its near and long-term crosshairs. More importantly, they are doing things differently than their competitors. Thus, pointing toward the competitive landscape as a high hurdle to clear is not an apples-to-apples consideration. Kubient is taking an existing service and making it better - much better. Hence, they become the hurdle for others to clear.
Best of all, investors don't need to wait for this “next best thing" to hit the markets. It's already there. The company created Kubient Audience Cloud, an innovative and comprehensive platform that facilitates a flexible open marketplace for advertisers and publishers to reach, monetize and connect their audiences. That's the commoditized version. Kubient goes well past the ordinary.
The Kubient difference and its significant advantage are that its platform provides a transparent programmatic environment utilizing proprietary AI-powered pre-bid ad fraud prevention technology. Not only that; its platform uses additional embedded proprietary real-time bidding marketplace automation for the digital industry that generates detailed, accurate, and actionable data at lightning-fast speeds. More simply, it allows advertisers to know they are getting what they paid for before they actually pay.
From a market perspective, its Audience Cloud platform has a virtually unlimited reach to offer a best-in-class solution for brands and publishers that demand transparency and the ability to reach audiences across all channels and ad formats. Perhaps the best part of Kubient's Audience Cloud platform is that everyone in the digital ad channel can benefit. And, because it can save a large advertiser potentially millions of dollars a year while making sure messages are actually seen, it's fair to say that in addition to helping them, it's a platform they need.
These advantages have garnered the attention of more than just current and potential clients. Interest is ramping to the point that Kubient engaged Lake Street Capital to evaluate ways to accrue value more quickly from additional innovations and enhancements to its technological capabilities. Of note, the relationship with Lake Street adds the optionality to merge, acquire, or invest in complementary businesses at a much faster rate. Incidentally, growth through acquisition is part of the Kubient game plan. Thus, having an ally in Lake Street, whose role is to look for strategic opportunities and investments, should add considerable value to the forward-looking opportunities. Through this collaboration, KBNT has established a conduit that aligns very well with its shareholder base, which is to evaluate and take action on ways to drive revenues and shareholder value higher sooner than later.
Leveraging A Position Of Strength
What is known is that the agreement is an action plan. Therefore, whether Lake Street works to find deals that amount to a merger of equals or an outright acquisition, KBNT has the luxury of entering agreements from a technological position of strength by having an impressive portfolio of assets. And, don't think competitors aren't paying attention. While they may be able to do some of the things Kubient can, few, if any, can match Kubient's under 300 milliseconds speed to detect ad fraud. That's still only part of the competitive advantage. Its platform's detail, accuracy, reliability, and scalability are other features too good to ignore. Thus, to modify an old saying goes, if they can't beat them, they might as well join them.
Consolidation makes sense. As in any competitive industry, there are billions of dollars up for grabs for those that can do things the best. Hence, if Kubient goes it alone, partners, or acquires, they will always be in a good place. Moreover, they are working in a market that is getting bigger as technology continues to accelerate the speed at which data is transferred. If you're reading this, you have a window into exactly how important Kubient technology is and why it's a compelling need by an ad client.
While reading this article, you undoubtedly had a flurry of ads pop up on the screen. Now, these ads weren't set to show days ago; they happened instantaneously based on many factors learned about you. More importantly, they are served with the pretense that a real person at that exact time will be reading them. Getting the ad to show is the easy part. However, there is much more to consider going on backstage.
As an article or web page loads, the behind-the-scenes action is incredible, with thousands of advertisers competing in millisecond speed to bid and place ads to drive user interest and reach a targeted audience to deliver their message about the product or service offered. When the viewer sees the ad, it's a result of potentially millions of scans performed at incredible speeds that decide on the ad itself as well as its placement. However, while that process alone is mind-boggling, it's not what makes Kubient technology a must-have product.
What makes Kubient technology invaluable is that beyond the speed of execution, it has an inherent ability to recognize whether the internet traffic for where the ad is placed is being visited by humans or bots. In other words, it sniffs out ad fraud in the blink of an eye, resulting in cost savings to an advertiser. Obviously, if an ad is displayed to a bot, it isn't worth the money spent. Advertisers know this. However, the problem they faced is that until Kubient's platform, when an advertiser bid to land a spot on a web page, they had no insight into whether its ad was being viewed by a human or a bot. There was no recourse, either. These ads are done and gone in seconds. Thus, billions spent, sometimes millions wasted. But, Kubient changed the dynamic and positively disrupted the digital ad sector.
It's excellent news for Kubient, its shareholders, and its clients. In addition to being cost-effective for clients, Kubient technology sleuths ad fraud in a fraction of a second. The result - no ad bid gets placed if the millisecond scan indicates it's a bot. If it's legit, the page is released, and the advertiser hits the offer. For all intents and purposes, it's an invaluable tool to reduce and even eliminate fraudulent ad spending on views that have zero chance of resulting in a sale. With this in mind, Kubient and its investors benefit from a massive market opportunity.
A Kubient Solution To A Multi-Billion Dollar Problem
The most current stats show that ad-fraud costs advertisers more than $13 billion per year. While that market offers substantial revenue-generating opportunities, it's a drop in the bucket compared to the expectation that ad fraud will reach upwards of $100 billion by the end of 2023. The thing is, Kubient is showing that ad fraud can be stopped. Therefore, by utilizing Kubient, advertisers don't need to account for residual waste as they can get what they pay for. Operating results show that more clients realize the value proposition.
In fact, revenues are pushing higher at an impressive rate. Kubient generated about $2.9 million in 2020 revenues. Since then, the numbers are ramping higher, with KBNT posting a net revenue increase of 141% year-over-year and 35% quarter-over-quarter to $677,000. Notably, those gains are organic, coming through an increase in partnerships on both the supply and demand side of the Audience Cloud marketplace.
The better news is that a revenue-generating tailwind appears to be at Kubient's back. Although the company doesn't provide guidance, connecting the dots suggest that its revenue trajectory is steepening. And, with the ad-fraud market expected to explode higher in 2022-23, revenues could spike appreciably in the process. Here's more good news on a valuation front: Kubient has only about 14.4 million shares outstanding. Even better, with 41% of those shares tightly held, investor demand could propel its market cap considerably higher as investors target a return to 52-week highs of $16.26 per share. Incidentally, even though the share price is lower today, KBNT appears better positioned today than when they posted that considerably higher stock price.
Moreover, after a successful capital raise last year, Kubient has the cash, talent, and technology to meet new challenges head-on. Thus, several factors point toward Kubient being ripe for investment consideration for those seeking undervalued investment opportunities.
Signs Point Toward A Prosperous 2022
A few reasons are front and center. Foremost, Kubient’s layers of platform functionality make it a best-in-class platform to head off ad fraud, making it a no-brainer for ad clients to get on board. There's also a place for ad platforms to embrace the technology, especially when digital ad budgets usually go through a tight funnel into the hands of a single provider. This means that clients can and often do move away if their platform isn't trustworthy.
Plus, as noted, Kubients revenues are tracking higher and should enjoy an appreciable tailwind as the market eventually returns to bullish conditions. Moreover, a low O/S count and about 41% of its shares being tightly held can also contribute to rising prices if KBNT delivers on its near-term objectives. Of course, following the money adds to the value proposition and helps validate the KBNT mission. The investment by Mithuq Capital is happening for a reason. Indeed, the sum of its parts makes Kubient a compelling investment consideration at current prices - but there's likely more to come.
While time will tell on that front, the most excellent news is that Kubient has plenty of value to offer today. And, with the stock performing exceptionally well in weak markets, it definitely bodes well for when the NASDAQ bulls return.
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