As Rumble’s (NYSE:RUM) stock opened for trade on Sept. 19, bears were going for a quick knock-out.
On Sept. 16, shares fell $2.50 each, or almost 25%, as CFVI Acquisition closed the deal to take the streaming service that “fights cancel culture” public. The deal to go public was executed through a Special Purpose Acquisition Company (SPAC) created by Cantor Fitzgerald.
An early test of the company’s appeal may be exclusive content due to launch this month, headlined by controversial journalist Glenn Greenwald.
But speculators are not focused on operations.
What’s Going on With Rumble?
Instead, the short-term focus is on a section of the agreement that could dilute the stock, contingent on a higher stock price. If the stock price trades over $17.50 for a month, within an escrow period of five years, up to 105 million new shares could be created. RUM was due to open on Sept. 19 at about $12/share.
Most of the media attention on Rumble remained political. That’s because Rumble is billing itself as a conservative version of Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube, while Truth Social (NASDAQ:DWAC) is a conservative version of Twitter (NASDAQ:TWTR). Truth Social is also trying to go public through a SPAC deal. A vote on that is expected on Oct. 10. The hope of the politicians is that infrastructure dedicated to amplifying their message will help their cause.
The problem, as I have written, is that politics is a narrow and ever-changing niche on which to hang any business plan. If a company’s political approach proves popular it can draw competitors. If it doesn’t, a politically charged initial public offering
(IPO) can quickly go under.
RUM Stock: What Happens Next?
What happens to RUM stock now will depend on how Rumble deploys the $400 million raised by the transaction.
If it can create a viable streaming platform that makes money, the current valuation will look cheap in retrospect.
However, If it fails in the business mission, politics won’t save it.
On the date of publication, Dana Blankenhorn held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
