This is a SPAC (special purpose acquisition company), and there's been announcements that Rumble is likely to go public by being acquired by it.

Dec 1, 2021 - Reuters - Video platform Rumble to go public via $2.1 bln SPAC deal



Tell me what's wrong with my investment.


Current market cap at 11.67: $445m
Price before news about Rumble: $9.63

Google paid $1.6b for YouTube in 2006

Article 1, 2006



From the infographic:





lol, that was a missed opportunity on Yahoo's part.

Article 2, 2009



Speaking of Facebook:

Instagram was bought by Facebook for $1b.

Article 1, 2012, before deal closed

Article 2, 2012, before deal closed





The articles remind me a bit of the late 1990s/2000 dot com mania when companies were valued for users and views rather than PnL, but a lot of tech companies are not profitable right away, because of the high capital cost required to scale out.

It would not surprise me if Rumble is not currently profitable, but it is backed by Peter Thiel.

That being said:

Fortune Magazine - Nov 30, 2020 - Meet Rumble, the YouTube rival that’s popular with conservatives




On a technical note, everyone knows how easy it is to find web sites and scripts and apps that let you download copies of YouTube videos. This is due to how the URLs to the raw mp4 files are directly available. Rumble, on the other hand, uses a clever, and much more difficult, method of streaming video into the browser that's hard to access by scripts outside of their platform. Accessing it requires injecting JavaScript directly into the web site while it's loaded in your browser. Possible, but not easy.

This means Rumble has better copyright protections than YouTube does - because its technically difficult to extract videos that arn't meant to be.

More from the Fortune article:



Relationship between preferred shares and common stock

I don't have information on how much of the ownership of the current corporate structure (not CFVI, but the current private company) is preferred shares and how much was paid for them.

So what's wrong with my investment with a cost basis of a little over $12 per share? Why will it fail (or succeed)?

Other info

SEC - What You Need to Know about SPACs - Investor Bulletin

Seeking Alpha - Beware the SPAC - How They Work And Why They Are Bad

Terms

Rumble - Press Release

seems like a solid bet, how much can you afford to lose?

$87mm.

I think the SPAC shares will represent about a 20% interest in the new public company, based on two items:

1. The CEO saying he will maintain voting control
2. The SPAC investing $300m of its trust funds, plus $100m of pipe (additional) funds, combined with the news articles saying the new company's valuation is $2.1b

So the $400m market cap of the spac isn't going to instantly 5x into $2.1b when the deal closes; 80% of the public shares will be owned by non-spac investors.

I don't think the exact terms of the deal are public yet.

Let's say I'm right. Tech companies tend to have high P/E ratios, like 25-30x or more. Let's give Rumble in mid 2022 a 25x PE ratio and a $2b valuation. Rumble would have to be making $80m per year in profit for those numbers to line up. That's not at all impossible; that's $1.00 per user in annual profit, not counting the tech stack deal with TMTG and other future customers. From that point forward, share growth beyond the current price of $12.00 per SPAC unit will require earnings growth, which is highly likely outside some major litigation or legal issues that result from planting and waiving a yuge "we're free speech fuck you" flag. But at least unlike Parler's old CEO, the Rumble CEO is retaining voting control over the entire company.

If I'm wrong about the deal terms, and the SPAC investors get 100% of the company, the spac shares will pop 2-5x by next year.

Apparently I am right so far

I sold mine on the Rogan news as I didn't think he would do it. I'll buy back in at some point but my view on the Nasdaq is too bleak of which this is a component so I need to be satisfied that it is done going down. (it isn't yet)

I don't follow Rogan so I didn't have any intuition as to whether he might take the deal or not.

I'm still above my DCA even after the 10% drop on Friday (it tapered going into the close). While I'm in this for a multi-year play rather than a trade, Rumble will need to avoid having more high-profile "thanks but no thanks" situations if they want to sell themselves as the place for high profile voices.

if they build out a resellable tech stack for cloud (something more than shitty vps's) I think Rumble is going to be a big deal beyond creator and user videos.

A huge selling point for me is that their CEO is an engineer and like Gab, is mindful of the long term plays and won't make horrible short term decisions like what plagued other companies.

There's a new thread about the Truth Social app being available and people having sign-up problems.

Sound familiar?

That's happened before with Frank Speech, Gettr, and Parler.

Inattention to engineering.

Took another beating on $CVFI today now around $13 and change. Well above my DCA still.

$TMTG popped on their app coming out into the app store this week. I have a small amount of that, I'll probably liquidate it at a profit and upsize my $CFVI position.

I have a lot more confidence in the technical execution of Rumble's leadership than I do of Trump's leadership, even though I wish and hope for the best for both.

aaaaaand we're back to the starting point

Seriously look at a chart of the Nasdaq, You will have headwinds till it gets to 10 if not a little lower.

It's now at $10, which is where a lot of SPAC's initially price their shares at.

My DCA is still just above $12, so I'm down about 17%, but that's not as much as the ETFs are down now that I sold in December to buy CFVI with.

CFVI seems to trade with DWAC, but far more muted. It also seems to be more muted lately than NASDAQ or SPY. Directionally it trades with tech, and with DWAC, but in smaller moves.

The last major news release out of Rumble was a few weeks ago where they reported improved numbers. DWAC has had some negative news lately about investigations and about current investors wanting to sell their shares, but Rumble hasn't been marred by that type of news.

I think it's a good sign that CFVI is not getting pulled down just as hard or harder than the broader tech market or likewise with DWAC.

Meant to @RedFox1911

I'll have to dig into the spac details again but I think 10 is the floor price

It can trade below $10 and liquidate below $10.

E.g. if the SPAC exists for 12-18 months, burns up some cash on clerical and administrative expenses, never buys a company, and then liquidates.

I think that's highly unlikely with CFVI, but liquidation w/o an acquisition is a non-zero possibility for DWAC.

If you want an example of how a SPAC can go, look at GGPI currently.  It was trading slightly below redemption last week.  The redemption date, the day the $10 floor gets removed, was yesterday.   The share price dropped almost 15% this morning.  Now only down about 8%.  Even when a merge goes through, the share price could end up being super low.  It's a bad time for SPACs with current market conditions.  Last year this merge would have blown the doors off, today, not so much.

It all boils down to the P/E and book valuation post-acquisition. Rumble has been posting some solid and consistent user growth numbers and has been a free standing financially sustainable business for several years.

Could I be down 10 or 20% post merger? Absolutely, if the financials don't look great.

Personally I think CFVI is trading as if its linked heavily to DWAC and Truth Social even though it's not. That being said it would have been nice if Joe Rogan had accepted the offer to move.

I think all the dumb stonks meme money is really focused on DWAC and doesn't understand the value of Rumble's move into cloud / tech services (they're building more than just a video platform).