January 24, 2022

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Is Rumble, A Right-Wing Social Media Company, Already The Next Meme Stock?

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Rumble, a fast-growing social media business with a strong following among conservative Americans, aims to take itself public next year in a SPAC deal that could value the company at over $2 billion, a transaction similar to the one former President Trump has envisioned for his own right-wing media firm.

To go public, Rumble intends to merge with an investment company initially created by Cantor Fitzgerald, a decades-old Wall Street bank. The deal woud leave Rumble with $300 million in cash, the company said in a statement announcing the transaction on Wednesday evening. It hopes to complete the process by the second quarter of next year.

The Cantor Fitzgerald investment vehicle, which already trades publicly under the CFVI ticker, saw its shares rise Thursday, increasing by nearly 25% to $12.

Rumble, which was founded in 2013, bills itself as a “true neutral platform” but has become a popular site among Republicans over the last two years as criticism of existing social media platforms like Facebook and Twitter has increased among conservatives, who say they unfairly limit speech.

“Rumble is designed to be the rails and independent infrastructure that is immune to cancel culture,” Rumble CEO and founder Chris Pavlovski said a statement. “We are a movement that does not stifle, censor, or punish creativity and believe everyone benefits from access to a neutral network with diverse ideas and opinions.”

Rumble exploded in popularity following Trump’s 2020 presidential election loss with its monthly users rising from around 2 million to over 20 million at the end of last year. The site now attracts nearly 40 million such users. Fueling that are conservative media personalities who’ve made a home for themselves on Rumble. An investor prospectus for the SPAC highlights figures such as Dan Bongino, Rep. Devin Nunes, Glenn Greenwald—and Trump.

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Putting a spotlight on the former president’s presence on Rumble is ironic, since the ex-president has lined himself up as a competitor to Rumble. He plans to create a social media app called Truth Social with a business plan nearly identical to Rumble’s: Offer conservatives a new place away from traditional social media. (Along with Trump and Rumble, right-wing users have also flocked to Gab, Telegram and a relaunched Parler.)

Trump too wants to use a SPAC to generate cash and attention for Truth Social, taking advantage of the fad around these blank-check companies. SPACs are an obvious lure for him and Rumble. They allow the two to circumvent traditional financing routes that might be unavailable to such openly partisan businesses, opening an easier path to the public markets. There, they can rally support directly from their fans and users, turning them into investors.

Since Trump announced the SPAC in late October, the publicly traded investment vehicle that plans to link up with him has already watched its shares swing madly from under $10 to as much $100. (They have since fallen back to a little below $50.) Those shareholders aren’t driven by what has traditionally motivated interest in a stock: concrete financial figures and future projections. Trump offered a scant pitch in his SPAC prospectus. Instead, he broadly outlined a dream about competing with every media company from Disney to Facebook, while building a web-services arm that would, theoritically, compete with Amazon’s own such unit. (Why? Conservative sites have occasionally been booted from Amazon and others for hosting controversial content. Trump might find a lucative, if niche, business selling the same thing without caring about what the sites publish.)

Rumble has more going for it, more to plausibly entice investors. Unlike Trump’s company, which has yet to launch as much as a beta-version app, Rumble does actually have an existing, eight-year-old business, though its prospectus offers no insight on basic markers of corporate success like revenue or profit. But Rumble can point to a rapid, recent increase in users and some significant signs of engagement. According to the Rumble prospectus, users watched 8 billion minutes of video in the third quarter, a 3,900% increase from a year ago. And Rumble also proposes to set up a web-hosting business similar to Amazon’s.

No, tangible business proposals aren’t really what seems to be propelling the share prices for Trump and Rumble. Those companies are, in effect, becoming meme stocks, securities with gyrating prices and manic investor sentiment.

Is a Trump-branded social media company really worth the $2 billion that it current fetches in market value? Are Rumble shares worth the increase that they’ve seen this morning? The underlying financials don’t fully support either. Rather, purchasing their stock seem more about investing in a social statement than a wager on future cash flows or profits. Remember Trump’s business has neither cash nor income, and while Rumble presumably might, it hasn’t detailed that publicly.

At the start of meme stock mania this year, buying a GameStop share was a comment that you were online, young—and wanted to flip the bird to existing traditional investors who had battered the stock. A few people did well trading GameStop shares and got to join this club. Many others did lose a lot of money, but yes, they got to join, too.

Buying Rumble or Trump shares embodies a like-minded point of view, except this time the middle finger is directed to Big Tech. Those shares are as much about belonging to a online community as they are about financing the operations of a media company—just as investing in GameStop was only partially about a bet on the future of buying videogames in person from a shopping mall store.

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