Technology company shares Rumble(NASDAQ: RUM) has hit a 52-week high as of this writing, having jumped about 300% in value since the lows set back in January. And much of its jump is the result of a massive $775 million investment from the investment arm of Tether Limited, the company behind the cryptocurrency stablecoin Lead(CRYPTO: USDT).
Tether is the third largest cryptocurrency in the world by market capitalization. As of this writing, the market cap is nearly $140 billion, trailing only Bitcoin a Ethereum. But Tether is not like these two other cryptocurrencies; it is stable money.
Stable currency intend to have a 1-to-1 price correlation with something else. For example, a US dollar stablecoin should always be worth $1. It is for people who want to explore the world of cryptocurrency without the volatility. Simply explained, they deposit $1 and Tether issues one new stable worth $1.
According to Tether, it had about $125 billion in reserves as of September 30 (its market cap was $119 billion at the time). Most of these reserves are in US Treasury bills. It needs to hold these reserves in case people want to redeem their stablecoins for dollars. But Tether is able to make money for itself with these huge reserves in the meantime.
Tether CEO Paolo Ardoino recently said it is on pace to hit $10 billion in net profit in 2024, which is a staggering amount for any company, let alone a cryptocurrency company. And the company doesn't just rake in this profit, but instead invests its money from time to time, which is what it does with Rumble.
Rumble turned heads when it went public in 2022 because this small company has big ambitions. The company plans to build an internet infrastructure free of censorship and hopes to compete with it Alphabet's video streaming platform, YouTube; Amazon' cloud computing service, AWS; social media platforms; and more.
The problem is that Rumble can't will all this into existence – it takes money. And when ambitions are this high, it costs a lot of money to build. Not surprisingly, the company has a net loss of $116 million in 2023 and has already lost another $102 million in the first three quarters of 2024.
But give Rumble some credit. The chart below shows his outstanding share count with the orange line. Ignore the short spike shortly after it goes public (calculation of these things can be temporarily distorted when going public). The chart shows that management has not, so far, been raising money by diluting shareholders with stock offers. Nor has he been taking on debt.
Conversely, Rumble has been funding its growth with cash on hand. And I believe that is the right step. After all, the company got its cash from its shareholders in the first place. These shareholders expect him to achieve his long-term vision by actually using this cash.
However, Rumble is still burning cash quickly and investors were worried about liquidity. As such the stock soared when Tether announced its massive investment as liquidity fears were eased.
There are reasons for optimism with Rumble. In the third quarter of 2024, the company had 67 million monthly active users – that's nothing to sneeze at. Granted, that's down from its user base of 71 million in the third quarter of 2022. But it's a large, engaged user base nonetheless.
The challenge has been to increase revenue by getting advertisers to buy into Rumble's potential. As CEO Chris Pavlovski lamented on the Q3 earnings call, “How much longer can brand advertisers ignore more than half the country?”
Rumble has a premium subscription service that compensates for lack of interest from advertisers. But advertising revenue is still important to the company and Pavlovski's question is an admission that this is a continuing headwind for the business. And, unfortunately, it's impossible to know how much longer it will be before the demand for ads rises.
The good news for Rumble shareholders is that, as long as it is, it has a longer run than it had before thanks to the infusion of cash from Tether. While there are still a lot of moving pieces here and more details with the transaction that are worth knowing, the main takeaway is that Rumble has more time than he had before. And when it comes to investing, more time is almost always a good thing.
Have you ever felt like you missed the boat when buying the most successful stocks? Then you'll want to hear this.
On rare occasions, our expert team of analysts discuss a “Double Down” stock. recommendation for companies they think are about to pop. If you are worried that you have already lost your opportunity to invest, now is the best time to buy before it is too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you would have $362,841!*
Apple: if you invested $1,000 when we doubled down in 2008, you would have $49,054!*
Netflix: if you invested $1,000 when we doubled down in 2004, you would have $498,381!*
Right now, we are issuing “Double Down” alerts for three amazing companies, and there may not be another opportunity like this anytime soon.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jon Quast He has positions in Ethereum. The Motley Fool has and recommends posts on Alphabet, Amazon, Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
