CFVI: This Cantor SPAC is Worth a Look if You Want to Invest in Rumble
Is YouTube alternative Rumble really a platform for just conservative voices? I signed up and checked it out. Here's what I found.
It's no mystery that there's a censorship campaign underway. We're seeing it with Spotify and Substack specifically. Substack has made it very clear that the company leadership has every intention to protect their writers and their freedom of expression. Big tech platforms are on the other side of the argument. Twitter, Facebook, and Google have made an obvious effort to scrub certain kinds of content from their platforms. From an investment perspective, I don't think there can be much debate at this point that this censorship crusade has been detrimental to user experience and, more recently, shareholder value. Twitter is down about 70% from its 52 week high. Facebook is down 25% just today after its first decline in daily active users EVER coupled with horrendous guidance on yesterday's earnings call. This is the unfortunate reality when your business model is monetizing the attention of your user base and you start kicking your user base to the curb.
Google has been a bit more immune to this because of its better diversified business structure. It owns the censorship-happy YouTube, but it also has a cloud storage service, an email service, and a robust advertising strategy. It's a bit more protected than pure play social networks like Twitter and Facebook. The latter of which is clearly dealing with an identity crisis and a growth story that is probably over. What has served as a bit of a safeguard for these entities despite the censoring is that alternatives have been either intentionally attacked by the oligopoly or they've been too fragmented to really gain mass adoption. I think that fragmentation might be coming to an end. First though, let's understand what a SPAC is.
What is a SPAC?
I'm going to be completely transparent here and admit that I don't have a tremendous amount of experience with SPACs. Here's what I know: SPAC stands for "special purpose acquisition company." I'm going to dumb this down a bit in hopes that it will help explain what a SPAC is. Imagine a you and I are running a company or legal entity that doesn't actually have a business or a revenue stream of any kind. All it has is investment capital that we have pooled together with our friends and other investors. We call this entity "Shellington." Shellington is a real entity with a lot of money that doesn't actually do anything. Despite no actual product, Shellington is traded in the public markets with a ticker just like any normal stock. Shellington exists solely to try to legally merge with a real business that is privately owned. When the merger is completed, the real business that merged with Shellington has gone public; just in a round about sort of way.
There was a big boom in SPACs during the COVID lockdowns. Nikola Motors went public via SPAC (it turned out to be a scam company). DraftKings went public via SPAC (not a scam company). Investors would theoretically be interested in buying pre-merger SPAC shares if they believe in the institutional fund who is overseeing the private company merger and if they have a rough idea of what kind of business the firm is targeting. It's a bit of a lottery ticket, but it's a way to potentially buy shares in an exciting growth company before the rest of the public. Some of them have been slam dunks. Some of them have been busts. That's the risk of buying the SPAC shares before the merger.
Rumble SPAC
The YouTube-alternative streaming platform Rumble is merging with Cantor Fitzgerald's CF Acquisition Corp. VI. Those shares trade as ticker CFVI. Cantor Fitzgerald is a respected investment fund that has been in business for almost 80 years. It was formerly the home of Joseph Foressi who was ranked the top analyst of the decade by TipRanks. There are 11,000 employees according to Wikipedia. It's an accomplished firm with a lot of brain power and that brain power sees something in Rumble. If all goes to plan, the merger will be completed at some point in Q2-22.
In case you've been living under a rock the last few months, Rumble has been referred to by many as a "conservative" streaming platform. That's not how the company views itself, however. CEO Chris Pavlovski described it like this:
Rumble is designed to be the rails and independent infrastructure that is immune to cancel culture. 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. We are on a mission to restore the internet to its roots by making it free and open once again.
Independent infrastructure is important. As Parler learned last year, when you're using Amazon Web Services, your website can disappear when big tech decides to collude against you. Rumble uses Tucows.
Rumble is growing fast
As part of the announcement for the planned merger, Cantor shared some pretty eye-popping engagement metrics for Rumble. With 8 billion minutes watched per month, the company cites a 44x increase in year over year user engagement from Q3 2020 to Q3 2021. The user growth over that same time period though is bananas.
That's crazy user growth and it's not stopping. Just today, the company announced 39 million active users in the month of January.
Who is on the platform?
What's interesting is the breadth of different users on the Rumble platform so far. Given my expectation that I'd only find conservative (even hateful creators), I was very surprised by how many different kinds of channels I found when I signed up for Rumble.
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