Rumble Inc. Soars 81% After Major Investment from Tether

Tether’s $775 Million Stake Could Propel Rumble’s Growth

The stock price of Rumble Inc. (NASDAQ: RUM) surged 81% on Monday, December 23. This significant increase followed the announcement that Tether, a digital payment system utilizing blockchain technology, will invest $775 million in Rumble. According to the company’s press release, Tether will acquire a stake in Rumble without nominating any directors to its board. Of the investment, Tether plans to use $525 million for a self-tender offer for 70 million shares at a price of $7.50 each, aligning with the price it offered for Rumble. The remaining $250 million will target growth initiatives.

This development marks a pivotal moment for Rumble, which has faced challenges with user engagement. Competing against platforms like BitChute, Odysee, and YouTube makes it difficult for Rumble to provide compelling content and attract renowned creators to retain users.

In terms of financial progress, Rumble’s revenue skyrocketed nine-fold, from $9.5 million in 2021 to $86 million over the last twelve months. However, the company has experienced significant fluctuations in its monthly active users (MAUs). While Rumble’s MAUs rose from 33 million in early 2021 to a peak of 80 million by the end of 2022, they fell to 44 million in Q2 2023 before gradually climbing back to 67 million. Its average revenue per user (ARPU) now sits at $0.33. To achieve stronger revenue growth, Rumble must enhance both metrics – MAUs and ARPU. Moreover, Rumble operates at a loss, reporting an operating loss of $143 million against sales of $86 million in the past twelve months. Its selling, general, and administrative expenses (SG&A) account for a steep 65% of revenue.

The proposed $250 million investment in growth initiatives may provide a crucial opportunity for Rumble to attract more users and boost its ARPU in the coming years. Consequently, this could aid in reducing losses, as the fresh funds allow the company more time to strengthen its operations.

Despite the recent surge, the outlook for RUM stock raises questions. Trading at $13, RUM stock is now valued at 31 times its trailing revenues, which appears elevated. Analysts project an average revenue growth rate in the high teens over the next few years. When considering future sales, RUM stock is priced at 23 times its expected revenues of approximately $113 million for 2025.

Additionally, RUM stock has lagged behind the broader market over the past three years, returning 11% in 2021, dropping 45% in 2022, and declining another 25% in 2023. This stands in stark contrast to the Trefis High Quality (HQ) Portfolio, which consists of 30 less volatile stocks and has consistently outperformed the S&P 500 each year during the same period.

Comparative Returns: RUM Stock vs. Market

[1] Returns as of 12/24/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.