My InvestorPlace colleague, Larry Ramer, is a buyer of CF Acquisition Corp. VI (NASDAQ:CFVI) and CFVI stock.
In my opinion, Ramer wisely dumped his Digital World Acquisition Corp. (NASDAQ:DWAC) shares. In his most recent Mar. 3 article about the special purpose acquisition (SPAC) merging with Trump Media and Technology Group (TMTG), he argued that it was an excellent time to take profits on DWAC stock. But, more importantly, Ramer sold out of DWAC and now holds shares in CFVI.
For those unfamiliar with CFVI, it is the SPAC that has agreed to merge with Rumble, the cousin to YouTube. Like DWAC, Larry believes that Rumble’s lack of censorship will drive significant amounts of content creators and viewers its way.
On Mar. 16, Rumble announced the addition of 15 major content creators across non-political categories. While this ought to be good news for CFVI stock, I won’t be buying it anytime soon.
Here’s why.
CFVI Stock and Cantor Fitzgerald’s Track Record
In my last article about CFVI, I called it a loser, suggesting that Rumble is riding former U.S. President Donald Trump’s coattails. Worse still, Cantor Fitzgerald, the people behind CF Acquisition VI, has a terrible track record with SPACs.
Rumble won’t be its opportunity to boost its mediocre SPAC performance. Here is what I had to say about Cantor Fitzgerald:
“Of the eight SPACs sponsored by Cantor Fitzgerald affiliates, four have found targets and have merged, while CFVI is in the middle of combining with Rumble. Three of its SPACs (IV, VII, and VIII), which have $850 million in cash to bring into potential mergers, have been shut out. The worst part about Cantor Fitzgerald’s record is that the stocks of the four that have found merger partners are down an average of 62%.”
There are SPAC sponsors that have added value to their merger partners. I’m not sure precisely what Cantor Fitzgerald brings to the party except money and ego. But forget for a moment that Cantor Fitzerald has arguably destroyed more than a billion dollars in shareholder value through its eight SPACs.
What do Cantor Fitzgerald and Ramer see that I don’t? Let’s consider the possibilities.
Rumble Is Adding Content
As I said in the introduction, Rumble announced it has added 15 content creators with a combined total of more than 20 million subscribers.
The top creator it added is PsycheTruth, with 4.01 million subscribers. It is a health and wellness site. However, the one that caught my attention because of the name is The Hillybilly Kitchen. It has 610,000 subscribers and looks well produced.
Aside from this, I have two problems with Rumble’s announcement.
First, it would be one thing if The Hillbilly Kitchen were ditching YouTube for Rumble. But given that YouTube has more than two billion users watching more than a billion hours of content each day, I highly doubt The Hillbilly Kitchen would cut off their nose to spite their face.
As soon as YouTube feels it has something to lose by content creators bolting for alternative platforms such as Rumble, it will tilt the deal it gives The Hillbilly Kitchen back in their favor so they don’t run away.
In the fourth quarter, YouTube generated $8.63 billion in revenue from ads alone. In 2021, Alphabet (NASDAQ:GOOG,NASDAQ;GOOGL), the parent organization of Youtube, hit revenue of over $200 billion annually for the first time.
Rumble can’t win a fight against YouTube. Offering a censor-free site for content creators might convince The Hillbilly Kitchen that it is an excellent way to grow its audience. But as soon as they realize censor-free is code for angry people looking for a place to vent, they’ll drop Rumble like a hot potato.
The second problem I have isn’t about Rumble’s announcement, but my wonderment at how so many people have nothing better to do than watch the modern version of TV all day. It is truly mind-blowing to me.
The Bottom Line on CFVI Stock
My colleague’s article about CFVI had a reference to Rumble’s estimate about its potential revenue. He wrote:
“Rumble estimates that if its audience becomes 18% as large as that of YouTube and its average revenue per user is 57%, as large as YouTube, its annual revenue would come in at $1.4 billion. I believe that by attracting star contributors, along with many American conservative and maverick consumers, the company can attain those metrics within two or three years.”
By Rumble’s numbers, YouTube has 222 million monthly active users in the U.S. (100/18%*40 million). That means YouTube has more than 1.7 billion users outside of the U.S.
Is it possible for YouTube to continue growing its U.S. audience? Absolutely. That is why Rumble’s estimates are so unbelievable.
Every startup investor has those what-if scenarios in their investor decks. If I get 1% of the U.S. dog food market, I’ll have “X” revenue. Unfortunately, it doesn’t work that way. You’ve got to build your projections from the bottom up, not top-down.
My colleague is fascinated with this anti-censor movement. However, as we see what is happening in Eastern Europe, when push comes to shove, most corporations don’t want to be associated with maniacs. It is terrible for the brand and isn’t good for business.
For this reason, I believe Rumble is YouTube’s not-as-good cousin. It is one to be avoided at all costs.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
