Tether to make $775 million 'strategic investment' in Rumble, shares rally 44.6%

From theblock by Daniel Kuhn

Tether USDT +0.26%, the world’s largest stablecoin issuer, has made a “strategic investment” of $775 million into YouTube-alternative platform Rumble, according to a Reuters wire. The move seemingly represents a deepening focus on the crypto industry for Rumble, which announced last month that it would allocate up to $20 million of its excess cash reserves to bitcoin.

Shares of Rumble, which had been steadily falling following recent interest rate news from the Federal Reserve, were down 1% at the close of the market on Friday at 4:00 p.m. ET. However, with news of Tether's investment, the stock skyrocketed as much as 44.6% in aftermarket trading, according to Yahoo Finance. 

Amid rising interest rates, Tether’s profits from yields on USDT’s backing assets have soared. For instance, the company brought in $2.5 billion in net profit in Q3 2024 alone. As a result, Tether has been making more and more strategic investments, as the firm — under the stewardship of recently promoted CEO Paolo Ardiono — has expanded into new sectors like AI, bitcoin mining and decentralized messaging. 

Notably, Tether’s investment in the video-sharing platform and cloud services provider Rumble speaks to Ardiono’s interest in censorship-restant communications. A skunkworks division housed by Tether is helping to develop the peer-to-peer chat and video conferencing app called Keet. The platform is built using technologies created by Ardiono’s other company, Holepunch.

Rumble said it would use $250 million of the funds “to support growth initiatives.” The remaining capital fund a self-tender offer for up to 70 million of its Class A common stock at $7.50 per share — the same price as Tether’s investment. Chris Pavlovski, Rumble chairman and CEO, will retain his controlling stake in the company and has said he will not sell more than 10 million of his stock holdings. Tether will purchase 103,333,333 shares in total.

“Many people may not realize the incredibly strong connection between the cryptocurrency and free speech communities, which is rooted in a passion for freedom, transparency, and decentralization,” Pavlovski said in a statement, also noting the investment represents “an immediate liquidity event for all of our stockholders.”

In Q3, Rumble earned revenue of $25.1 million, a 39% year-over-year jump, though it posted a net loss of $31.5 million (up from $29 million in Q3 2023). It has approximately 67 million average monthly active users and largely caters to a conservative audience. Rumble's cloud services business hosts Truth Social. Peter Thiel, Vivek Ramaswamy and Vice President-elect JD Vance invested in Rumble in 2021 at a $500 million valuation.

Tether counterparty Cantor Fitzgerald Co. is acting as placement agent and dealer manager for the deal.