Shares of Rumble (NASDAQ: RUM) skyrocketed 93% on Monday after the company announced a significant $775 million investment from Tether (CRYPTO: USDT).
The announcement, made after markets closed on Friday, marks a major development for the technology platform, which has faced financial challenges despite its substantial user base of 67 million monthly active users.
Tether agreed to purchase 103.3 million shares of Rumble Class A Common Stock at $7.50 per share, representing a 4.3% premium to Rumble’s closing price on Friday. The deal values Rumble at approximately $2 billion.
Rumble plans to allocate $250 million of the proceeds to fuel growth initiatives, while the remaining $525 million will be used for a self-tender offer for up to 70 million shares at $7.50 each.
CEO and Founder Chris Pavlovski intends to participate in the tender offer but will sell no more than 10 million shares, ensuring he retains super-majority voting control.
The transaction is expected to close in the first quarter of 2025, and the existing board structure will remain unchanged.
The investment comes at a critical time for Rumble. Through the first three quarters of 2024, the company reported a staggering loss of nearly $102 million, driven by a negative gross margin of 59%. The platform's operating costs far exceeded its revenue generation, leaving little room to cover additional expenses.
The infusion of $250 million in cash significantly alleviates concerns about Rumble’s liquidity and positions the company to pursue growth initiatives. Wedbush analysts noted the strategic investment "removes intermediate-term liquidity risk" and raises the price target for Rumble stock to $10 from $8.
Wedbush analysts remain cautious, maintaining a Neutral rating but emphasizing the improved financial outlook.
“The addition of $250 million of incremental cash removes intermediate-term liquidity risk and gives management more flexibility to invest in growth,” the note said.
While Rumble remains in the red, the company is in the early stages of improving monetization. The Tether investment signals confidence in Rumble’s ability to leverage its sizable and engaged user base, which could help the platform achieve profitability over time.