Rise of 'Right' Companies—Is CFVI Stock a Buy Before Rumble Merger?

CF Acquisition Corp VI (CFVI) stock has seen some upwards price momentum over the last week after it announced that it would merge with YouTube competitor Rumble. The stock looks set to continue its momentum looking at the early market price action on Dec. 6. What’s the forecast for CFVI stock and should you buy it before the Rumble merger date?

Rumble describes itself as a “neutral video platform.” It was “built on the belief that all creators should have the opportunity to freely express themselves and reach their followers without censorship or restrictions.” The platform is popular among those leaning towards the right of the political divide.

There has been a flurry of SPAC activity in companies that are leaning towards the right. Digital World Acquisition (DWAC) has announced a merger with former President Donald Trump’s TMTG (Trump Media and Technology Group). DWAC stock is trading at a steep premium to the IPO price even though it has tumbled from the 52-week highs.

Black Rifle Coffee Company is also going public in a reverse merger with SilverBox Engaged Merger Corp. I (SBEA). All three of these companies have a Trump connection. While DWAC is directly linked to Trump, Rumble has partnered with Trump Media Group for distribution. CFVI CEO Howard Lutnick sees Trump’s Truth Social Network as a partner instead of a competitor.

Donald Trump Jr. endorsed Black Rifle Coffee Company. The company also supported many of Trump’s conservative policies, including the Muslim ban. However, Black Rifle Coffee denounced extremists earlier in 2021.

Rumble announced a definitive business combination agreement with CFVI. The two companies are expected to merge in the second quarter of 2022. As of now, we don’t have a specific date and the release also didn't mention the post-merger ticker. Like all SPAC mergers, the business combination is subject to regulatory clearances and approval from CFVI stockholders.

The deal with CFVI values Rumble at an initial enterprise value of $2.1 billion. The existing Rumble stockholders would earn additional shares of the combined entity if the stock prices reach $15 and $17.5. There's an earnout feature in the DWAC-TMTG merger also.

As part of the merger, CFVI would receive $400 million. This includes $300 held in SPAC trust account and another $100 million in PIPE (private investment in public equity). After the merger, Rumble founder Chris Pavlovski would retain voting control.

It isn't uncommon for founders of companies that are going public to retain voting powers. In Rumble’s case, the company says that Pavlovski would retain voting power to ensure the “neutrality” of the platform.

Since Rumble isn't publicly traded yet, you can't buy the stock directly. However, after the merger announcement, buying CFVI gives you exposure to Rumble. The argument assumes that the merger will sail through. Looking at the soaring stock price of CFVI, the merger should eventually get approval from stockholders.

Rumble is a fast-growing platform and had 36 million average monthly users in the third quarter of 2021. Rumble's growth is similar to that of TikTok. The company says that it has just started to monetize its distribution. The merger presentation lacks crucial details like the current and projected financials. Even the PIPE investors aren't currently public.

We saw something similar in DWAC, which put a lot of emphasis on Trump’s mass following on social media accounts before the ban. As for CFVI, the presentation put a lot of emphasis on the market opportunity and the various celebrities that are on the platform.

While it won't be prudent to comment on the valuation, and by its extension, the forecast for CFVI before the Rumble merger, the rise of the “right” and association with Trump makes it an interesting SPAC to watch.