Cantor Fitzgerald wins big on Tether’s investment in Rumble

On December 20, Rumble, the conservative video-sharing platform, announced that it had received a $775 million “strategic investment” from stablecoin platform Tether. The terms of this investment were… interesting:

“Investment: Tether has agreed to purchase 103,333,333 shares of Rumble Class A Common Stock at a price per share of $7.50, totaling $775 million in gross proceeds to Rumble. The Company will use $250 million of the proceeds to support growth initiatives.

Self Tender Offer: With the remaining gross proceeds, the Company will fund a self tender offer for up to 70 million shares of Rumble Class A Common Stock at a price per share of $7.50, net to the holder in cash. All holders of Rumble Class A Common Stock will be eligible to participate in the tender offer on the same terms. Certain Rumble stockholders have signed support agreements committing to tender 70 million shares in the aggregate, subject to the same proration and other terms of the tender offer that apply to all Rumble stockholders participating in the tender offer. Chris Pavlovski has committed to tender, and does not intend to sell more than 10 million shares of Class A Common Stock in the tender offer…

Timing: The investment and the tender offer are expected to close in the first quarter of 2025.”

Basically, only $250 million of the $775 million is actually an investment in the business, where the cash actually hits Rumble’s balance sheet. The other $525 million is funding a “self tender offer,” meaning that Rumble will be buying up to 70 million shares of its stock back from investors at $7.50 per share, and the deal is expected to close in Q1 of next year.

A couple of things to note here: first, by any conventional metric, Rumble is just a really, really bad business. In Q3 2023, it lost $29 million on $18 million in revenue, and in Q3 2024 it lost $32 million on $25 million in revenue. Through the first nine months of 2024, Rumble lost $102 million, and even after accounting for noncash expenses, its operating cash flow was still -$75 million. In total, the company’s cash and cash equivalents shrank from $218 million at the beginning of the year to $131 million at the end of September.

Essentially, despite revenue growth, Rumble’s losses have continued to grow even faster, its cash burn is high, and at its current pace the company would be running low on cash within the next 12 months. Given its cash needs, it’s no surprise that it would look to raise outside financing to the tune of $775 million. What is surprising, however, is that Rumble is then using $525 million to… buy back shares at $7.50. For context, the stock closed at $7.19 on December 20, and it had been trading below $7 for most of the year. Rumble needs cash on its balance sheet, so spending that cash to buy back stock feels counterintuitive.

But there is an interesting wrinkle here: Cantor Fitzgerald, the investment bank and financial services firm led by Howard Lutnick (Trump’s secretary of commerce appointee), advised on this deal. Cantor Fitzgerald was also the sponsor behind the SPAC that took Rumble public, and it still owns more than 9 million shares of Rumble, which hasn’t done too well in the public markets. Per Rumble’s press release, “certain Rumble stockholders have signed support agreements committing to tender 70 million shares in the aggregate,” and it was interesting to me that the company advising on this transaction happens to own a sizable stake in the company as well, meaning that it could benefit from being one of the shareholders selling into the tender offer.

Yet the reaction of Rumble’s stock price after the news hit complicated things. Rumble was trading around $7 before the investment was announced. $7.50 would be a premium to that price, so it’s likely that plenty of shareholders would be happy with the $7.50 deal. But since this investment was announced, Rumble’s stock price has jumped from $7.19 to $16.70, as of this writing.

If you’re a Rumble shareholder, why would you sell to a tender offer at $7.50 when you could sell on the open market for $16 or more? You’d be leaving $9 and change on the table per share, so it wouldn’t surprise me if we saw this deal either get renegotiated or pulled altogether.

Regardless of what happens, Cantor Fitzgerald feels like the big winner here. The bank gets transaction fees, the value of its Rumble stake has now doubled, and it could possibly sell its stake at a premium to its recent stock price, renegotiate the terms of the tender to a higher price, or, at a minimum, retain its now more valuable stock. Not bad.