Today's dramatic surge propelled Rumble's stock to reach its highest point within the past 52 weeks.
Today's dramatic surge propelled Rumble's stock to reach its highest point within the past 52 weeks.
Following the market wrap on a Friday, tech firm Rumble (RUM 89.29%) disclosed that digital currency firm Tether (CRYPTO: USDT) would pump in $775 million. Given that Rumble was appraised at approximately $2 billion during the announcement, this investment is substantial. As a result, Rumble's stock soared an impressive 66% by 10:15 a.m. ET.
Rumble: Swimming in the Red and Welcoming Tether's Support
The question of Tether's financial reserves is a topic for another conversation. However, Rumble's investors are quite optimistic about the investment announcement due to the company's financial struggles.
By the third quarter of 2024, Rumble had racked up nearly $102 million in losses. Its significant negative gross margin of 59% this year is a significant factor in these losses. This implies that the cost of offering its services surpasses the revenue generated. Add on top of that, operational expenses.
Despite having $131 million in cash and equivalents at the end of the third quarter of 2024, Rumble only had enough funds to sustain itself for a year at its current rate of burn. Tether's generous investment now provides Rumble with extra leeway, contributing to a rise in share prices.
Rumble Can Relax Slightly Now
The investment is scheduled for the first quarter of 2025, but the arrangement is rather complex for Rumble shareholders. Only $250 million will directly fund the company's operations, while the remaining $500 million is earmarked for purchasing shares at $7.50 apiece from shareholders eager to sell.
Given that the share price is currently over $7.50, shareholders are unlikely to entertain this offer. However, even if the full $500 million is used for this purpose, Rumble will still be left with $250 million to scale its operations, extending its runway by a couple of years at its current pace. This is a considerable boost, making Rumble stock a worthy investment consideration.
Rumble's investors view the investment from Tether as a promising sign, as the company has been grappling with significant financial losses and a negative gross margin. The substantial injection of $775 million is expected to alleviate some of Rumble's financial pressures and potentially lead to improved financial health.
With the added funds, Rumble can look towards investing in its operations and scaling its business, aiming to extend its runway beyond its current one-year limit. This financial boost positions Rumble's stock as an attractive investing opportunity for potential investors.