After the market closed on Friday, technology company Rumble (RUM -6.39%) announced that Tether (USDT -0.03%) will invest $775 million. Considering Rumble was valued at around $2 billion when the investment was announced, the investment is massive. And that's why Rumble stock was up a stunning 66% as of 10:15 a.m. ET.
Rumble is losing money and appreciates Tether's help
How Tether has that much money lying around is another subject for another day. But when it comes to Rumble, investors are responding favorably to news of the investment because this business loses a ton of money and it could use the help.
Just consider its year-to-date numbers. Through the first three quarters of 2024, Rumble has lost nearly $102 million. And a big reason for this is its negative gross margin of 59% so far this year. In other words, it costs more to provide its services than what it generates in revenue. And then it still has to pay for operating expenses.
Rumble did have $131 million in cash and equivalents at the end of the third quarter of 2024. But that only gave the company about one year of runway at its current burn rate. Tether's substantial investment gives it far more breathing room and it's why investors are sending shares higher today.
Rumble can breathe a little easier now
The investment isn't expected to come through until the first quarter of 2025 and there are some potentially confusing details here for Rumble's shareholders. Only $250 million is directly going to the company's business needs. The remaining $500 million will be used to buy stock at $7.50 per share from shareholders who wish to sell.
Now that the price is well over $7.50 per share, shareholders are unlikely to take the offer. But even assuming all of this money is used for this purpose, Rumble will still be left with $250 million to grow the business, which provides a couple of extra years of runway at its current pace. That's significant and does make Rumble stock an interesting one to watch.
