Rumble (NASDAQ: RUM) stock is seeing explosive gains in Wednesday’s trading. The streaming-video company’s share price was up 34.6% as of 11:45 a.m. ET.
Rumble stock is continuing to rocket higher on the news that the company is set to receive $775 million in an investment from Tether — the company behind the Tether stable-coin cryptocurrency. The news has turned Rumble into a hot meme stock, and its share price is surging in conjunction with investors piling in and hoping to score speculative gains.
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Rumble stock is now up 133% over the last week of trading.
Last Friday, Rumble announced that it will be selling $775 million worth of new stock to Tether at a price of $7.50 per share as part of an investment deal between the two companies. Rumble will use $250 million of the proceeds from the stock sale to fund its business operations and growth initiatives. The streaming specialist intends to use the other $525 million from the stock sale to buy back shares from other large shareholders at a price of $7.50 per share.
While the deal is poised to give Rumble a needed cash injection, meme stock momentum appears to be playing a bigger role than fundamentals when it comes to the company’s recent valuation gains. The deal has effectively turned Rumble into a speculative, cryptocurrency-adjacent play — and some investors are betting that this new dynamic can pave the way for more explosive gains.
With the Tether deal, trading for Rumble stock has become completely divorced from the company’s fundamentals. Investors are getting excited about a variety of potential scenarios that could see Tether provide continued financial support for the business, or guide Rumble into being a more crypto-focused platform. The rising connection to the cryptocurrency space has some investors feeling very bullish, and it’s possible that this sentiment could power more big gains for the stock in the near term.
Prior to the Tether announcement, Rumble announced that it was looking to make Bitcoin investments a substantial part of its balance sheet. The news corresponded with big gains for the stock and helped establish the foundations for its stock being considered a play in the crypto market.
On the other hand, the recent gains for the stock appear to be largely hype driven — and shares have high downside risk at current prices. Rumble’s streaming video platform has been putting up relatively week engagement and monetization metrics, and the stock could crash if it begins trading more in line with the company’s fundamentals.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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