Rumble (RUM) shares surged 60% on Monday after Tether announced a $775 million investment in the video platform. Tether, known for its stablecoin, purchased 103.3 million shares of Rumble for $7.50 each. This transaction maintains CEO Chris Pavlovski’s status as majority stakeholder.
Rumble shares jump 60% after Tether’s $775 million investment
Rumble stated it will allocate $250 million of the investment to support growth initiatives. The rest will fund a self-tender offer for up to 70 million Class A Common Stock shares at the same price. Pavlovski described Tether as “the perfect partner” for Rumble’s upcoming growth phase. The two companies also plan to develop advertising, cloud, and cryptocurrency payment solutions together, according to Tether CEO Paolo Ardoino.
When to buy Nvidia stock: An analysis
Tether’s investment eases liquidity concerns
Oppenheimer noted that this deal “should alleviate investor concerns related to liquidity” for Rumble, which has been struggling financially. The firm rates Rumble as a “perform” investment. Notably, Rumble has reported significant losses, with nearly $102 million in losses through the first three quarters of 2024 and a negative gross margin of 59% this year. These figures indicate that the company’s operational costs exceed its revenue generation.
Despite these challenges, Rumble had $131 million in cash at the end of Q3 2024, providing it with approximately a year of runway at the current burn rate. Tether’s investment significantly enhances Rumble’s financial position, allowing the company to breathe easier amid ongoing losses.
The transaction is set to close in the first quarter of 2025, and while $250 million goes directly to Rumble’s business operations, the remaining $500 million is earmarked for stock buybacks at the initial offer price of $7.50 per share. Given that Rumble shares have recently climbed to levels above this price, shareholder interest in selling stock at this rate may diminish.
The current surge presents both opportunity and caution for investors:
- Why buy now? If you believe in Rumble’s vision and its ability to capitalize on Tether’s investment, now could be an opportune time to enter. The stock’s momentum could continue, especially as Rumble begins implementing growth initiatives funded by the deal.
- Why wait? The stock’s rapid rise could lead to short-term volatility. Additionally, Rumble’s path to profitability remains unclear, and execution risks persist. Waiting for clearer signs of operational improvements might be a safer approach.
Rumble’s partnership with Tether provides significant financial backing and strategic potential, but it comes with inherent risks. For aggressive investors confident in the company’s long-term prospects, this could be a compelling entry point.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Rumble
