Rumble Stock Takes a Hit Amid Market Pressure
The streaming-video company Rumble (NASDAQ: RUM) is experiencing a significant decline in its share price, down 9.3% as of 1:30 p.m. ET. This drop is particularly notable given the broader market’s relatively modest decline, with the S&P 500 index down 0.7% and the Nasdaq Composite index down 0.8%.
Year-End Profit-Taking and Tax-Harvesting
As the year comes to a close, investors are taking profits on their winners and selling losers to minimize tax liabilities. This phenomenon, combined with thin trading volume, is putting pressure on the market. Rumble stock, in particular, is feeling the pinch after a recent surge in value.
A Deal with Tether Sparks Rally, But Momentum Fades
On December 20, Rumble announced a deal with Tether, the company behind the Tether cryptocurrency, to receive $775 million in investment. This news sparked a massive rally, with Rumble’s share price increasing by 91% over the last month. However, despite this significant gain, the company’s bullish momentum appears to be waning.
Investment Details Raise Questions
While Tether’s investment is substantial, only $250 million will be used to fund Rumble’s business operations and new growth initiatives. The remaining $525 million will be used to buy back stock from large shareholders at $7.50 per share, the same price at which Tether will purchase new shares. This raises questions about the company’s highly growth-dependent valuation, which currently stands at over 40 times this year’s expected sales.
A Risky Proposition
Some investors are betting that Tether’s involvement will steer Rumble towards a greater focus on cryptocurrencies or that meme momentum will drive further rallies. However, this optimism may be misplaced, given the company’s precarious valuation.
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