Rumble Stock Soars on Tether Investment, But Can the Momentum Last?
A Much-Needed Cash Infusion
Rumble’s stock price surged 3.7% in Tuesday morning trading, following a significant investment announcement from Tether, the company behind the popular stable-coin cryptocurrency USDT. The deal will see Tether inject $775 million into the streaming video specialist, with Rumble issuing 103 million new shares at $7.50 per share.
Growth Initiatives and Share Buybacks
Rumble plans to allocate $250 million of the proceeds towards growth initiatives, while the remaining amount will be used to repurchase shares from current shareholders at the same price of $7.50 per share. This move is expected to extend the company’s operational runway by two years, based on its current cash-burn rate.
A Rapid Rise, But Fundamentals Remain a Concern
Rumble’s stock has skyrocketed 103% over the last month, driven by the Tether investment and renewed meme-stock enthusiasm. However, investors should exercise caution, as the company’s underlying fundamentals remain a concern. Despite the influx of capital, Rumble’s business has been posting significant losses and burning through its cash reserves rapidly.
A Mixed Bag for Shareholders
While the deal is minimally dilutive to existing shareholders, the stock now trades far above the level at which Rumble is selling stock to Tether and repurchasing shares. This raises concerns that the company may need to sell new stock at higher levels, potentially diluting shareholder value further.
A Meme-Stock Play or a Bet on Tether’s Involvement?
Investors in Rumble are essentially making a bet on either the company’s meme-stock momentum or Tether’s ability to transform the business. With engagement and monetization metrics remaining weak, and the business struggling to scale, investors should carefully consider their investment thesis.
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