MW Video platform Rumble rallies on $775 million investment from an influential - and oft-scrutinized - crypto giant
By Bill Peters
Stablecoin firm Tether plans to buy more than 103 million shares of Rumble
Shares of Rumble Inc. rocketed higher after hours on Friday after the right-leaning video platform said it landed a $775 million investment from Tether, a giant in the crypto world whose digital assets help fuel trading but have faced scrutiny from analysts and regulators.
Rumble (RUM) - a company that prides itself on what it describes as "technologies that are immune to cancel culture" - said that it would use $250 million of the proceeds to fund its growth and the rest for a self tender offer for up to 70 million of its common shares.
Rumble added that once the transaction closes, Chief Executive Chris Pavlovski would keep his controlling stake in the company. Under the deal, Tether will buy 103,333,333 shares of Rumble's Class A common stock at $7.50 apiece.
The transaction is expected to close in the first quarter of 2025. Tether will have a minority stake, Rumble said, but won't be able to designate board members.
Tether is a so-called stablecoin, a digital asset tied to the U.S. dollar and backed by Tether's reserves, intended to help facilitate trades and shield traders from the volatility often found in digital assets. It has a market cap of more than $140 billion, making it the third largest cryptocurrency, according to CoinDesk. Rumble's announcement on Friday said it had more than 350 million users.
"I could not be more excited about this collaboration with Tether for a number of reasons," Pavlovski said in a statement. "First, many people may not realize the incredibly strong connection between the cryptocurrency and free speech communities, which is rooted in a passion for freedom, transparency, and decentralization."
He continued: "Second, the immediate commitment of adding $250 million in cash to our balance sheet not only confirms the level of support and commitment to a collaboration between our companies, it also fuels our growth initiatives. And, third, this transaction provides an immediate liquidity event for all of our stockholders who elect to participate in the self tender offer."
Shares launched 51.6% higher after hours. As of Friday's close, the stock has run more than 60% higher this year, and was up 24% since Nov. 6, the day after the U.S. presidential election.
The stock gains arrived as Rumble tries to compete with much bigger platforms like YouTube, offering video content from Dan Bongino, Russell Brand and others. In 2021, Rumble said it landed an investment from Peter Thiel and Narya Capital, a venture-capital firm co-founded by JD Vance, the vice president-elect.
In this year's third quarter, Rumble had revenue of $25.1 million, a 39% gain year over year, with a big increase in monthly active users and narrowed losses. Last month, the company said its board had approved a move that would put some of its excess cash reserves into Bitcoin, whose value has surged since the election, after President-elect Donald Trump showed more receptiveness to cryptocurrencies.
As Tether has grown, its size has raised concerns about the overall risk to markets, Reuters reported this year. The outlet added that the crypto lobby - which has become a bigger force in politics overall - has downplayed the risks from stablecoins.
Tether over recent years has also battled with critics who have questioned the transparency of its reserves, even as it takes steps it says are intended to address those issues. And it has highlighted its efforts to help investigators recover stolen assets or otherwise work with law enforcement.
In 2021, Tether, along with crypto exchange Bitfinex, were ordered to pay $18.5 million in penalties to the state of New York as part of an agreement following accusations of "hiding" roughly $850 million in losses. Later that year, the two companies settled with the Commodity Futures Trading Commission over alleged "misleading statements and omissions of material fact in connection with the U.S. dollar tether token."
In January, a United Nations report also said tether played a role in illicit activity in Asia. Tether, in response, said it was "disappointed" in that report and accused the organization of ignoring Tether's collaboration with law enforcement.
Tether also challenged a Wall Street Journal report in October saying the U.S. government was investigating it over possible "possible violations of sanctions and anti-money-laundering rules."
"These stories are based on pure rank speculation despite Tether confirming that it has no knowledge of any such investigations into the company," Tether said in a statement.
-Bill Peters
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(END) Dow Jones Newswires
December 20, 2024 19:57 ET (00:57 GMT)
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