Tether’s Strategic Investment in Rumble

Tether, the world’s largest stablecoin issuer, has made a strategic investment of $775 million into YouTube-alternative platform Rumble, as reported by Reuters. This move indicates Rumble’s deepening focus on the crypto industry, including an allocation of up to $20 million of its excess cash reserves to Bitcoin announced last month.

Shares of Rumble had been declining following recent interest rate news from the Federal Reserve, falling 1% by the market close on Friday at 4:00 p.m. ET. However, Tether’s investment sparked a dramatic aftermarket surge, with Rumble’s stock increasing by as much as 44.6%, according to Yahoo Finance.

Amid rising interest rates, Tether’s profits from yields on USDT’s backing assets have surged, with the company reporting a net profit of $2.5 billion in Q3 2024. Under the leadership of newly promoted CEO Paolo Ardiono, Tether has been increasingly active in strategic investments across sectors such as AI, Bitcoin mining, and decentralized messaging.

Tether’s investment in Rumble reflects Ardiono’s interest in fostering censorship-resistant communication. A division of Tether is also developing a peer-to-peer chat and video conferencing app called Keet, utilizing technology from Ardiono’s other venture, Holepunch.

Rumble intends to allocate $250 million of Tether’s funds to support growth initiatives, while the remainder will finance a self-tender offer for up to 70 million of its Class A common stock at $7.50 per share, matching Tether’s investment price. Rumble’s CEO, Chris Pavlovski, will maintain control over the company and limit sales of his shares to no more than 10 million. In total, Tether will acquire 103,333,333 shares.

Pavlovski commented on the strong connection between the cryptocurrency and free speech communities, rooted in shared values of freedom, transparency, and decentralization. He also noted that this investment represents an immediate liquidity event for all stockholders.

In Q3, Rumble reported revenue of $25.1 million, a 39% increase year-over-year, but experienced a net loss of $31.5 million (up from $29 million in Q3 2023). Rumble boasts around 67 million average monthly active users and primarily serves a conservative audience. Its cloud services division hosts Truth Social. Notable investors in Rumble include Peter Thiel, Vivek Ramaswamy, and Vice President-elect JD Vance, who invested in 2021 at a $500 million valuation.

Additionally, Tether’s counterparty, Cantor Fitzgerald & Co., is serving as placement agent and dealer manager for this deal.