RUM Group Inc. current report, 16 September 2022

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Rumble Inc. Form 8-K Summary

Business context and reporting period

Filed September 22, 2022, reporting events beginning September 16, 2022. Rumble Inc. completed its business combination with CF Acquisition Corp. VI, a special purpose acquisition company, through an Ontario court-approved arrangement. CF VI changed its name to Rumble Inc., and Rumble became the operating business and successor issuer.

Rumble is an online video platform. Its Class A common stock and warrants began trading on Nasdaq on September 19, 2022 under the symbols RUM and RUMBW, respectively.

Financial metrics, capitalization and liquidity

  • The filing incorporates historical financial information for the three months ended March 31, 2022 and 2021, fiscal years 2021 and 2020, and interim financial statements for the six months ended June 30, 2022 and 2021.
  • Unaudited consolidated financial statements as of June 30, 2022, together with management’s discussion and analysis for the six months ended June 30, 2022 and 2021, were filed as exhibits. The provided filing text does not state clear revenue, net income or loss, operating cash flow, margins, cash balance, debt balance, or liquidity figures.
  • The stated arrangement consideration was $3.186 billion, consisting of $3.150 billion plus Rumble’s cash and cash equivalents at closing, net of debt, and the aggregate exercise price of outstanding options.
  • The transaction included a $15.0 million sponsor forward purchase consisting of 1.875 million Class A shares and 375,000 warrants, and an $83.0 million PIPE investment for 8.3 million Class A shares.
  • At closing, the Company issued 63.123 million Class A shares, 168.762 million Class C shares and 105.782 million Class D shares, including shares placed in escrow as described in the filing.
  • The Company had 27.122 million shares reserved for its 2022 Stock Incentive Plan, subject to an annual 5% evergreen increase for ten years and additional increases upon specified earn-out events.
  • The filing states that Rumble has not paid cash dividends. Future dividend decisions are subject to the board’s discretion.

Material changes versus the prior comparable period

  • The transaction converted CF VI from a shell company into the combined operating company and resulted in a change of control.
  • Pre-business-combination Rumble equityholders held approximately 96.4% of the Company’s voting power after closing, while former CF VI public shareholders held approximately 2.4%, excluding sponsor and related-party holdings.
  • Christopher Pavlovski, Rumble’s founder and CEO, received Class D shares carrying 11.2663 votes per share and held approximately 85% of the Company’s voting power on a fully diluted basis at closing.
  • The Company adopted an amended and restated certificate of incorporation, amended and restated bylaws, a new code of business conduct and ethics, and the 2022 Stock Incentive Plan.
  • MNP LLP replaced WithumSmith+Brown, PC as the independent registered public accounting firm. The filing reports no qualifying disagreements or reportable events with Withum; Withum’s prior reports included going-concern language related to CF VI’s ability to complete a business combination and a prior warrant-accounting restatement.
  • Mr. Pavlovski received restricted stock units covering 1.1 million Class A shares, vesting one-third annually from September 16, 2023 through September 16, 2025, subject to continued employment.

Guidance, outlook, management commentary, risks and unusual items

  • No specific revenue, earnings, cash flow or other quantitative financial guidance is provided in the filing text.
  • Management states that future performance depends on growing and managing the business profitably, retaining users and employees, maintaining customer relationships and competing effectively. The filing cautions that recent rapid growth may not predict future results.
  • Material risks include cybersecurity incidents, data privacy compliance, intellectual-property claims, liability for third-party content, content moderation controversy, internet and platform access disruptions, dependence on third-party vendors, rising hosting and delivery costs, competition for traffic and advertising, tax changes, regulatory changes affecting online speech and social media, and uncertain COVID-19 effects.
  • The Exchange Agreement provides holders of ExchangeCo shares with economic-equivalence protections and specified exchange rights, including rights triggered by certain insolvency or liquidation events.
  • Registration rights require the Company to register resales of certain investor-held Class A shares and provide piggyback registration rights, subject to customary conditions.
  • The transaction included a $11.0 million repurchase of 1.1 million ExchangeCo shares from Mr. Pavlovski; $1.0 million of the proceeds was reinvested in the Class D share subscription.

Most important facts for investors to verify

  • Review Exhibit 99.2 and Exhibit 99.4 for the actual six-month 2022 revenue, operating results, cash flows, cash balance, debt and liquidity position.
  • Reconcile the reported share counts, escrow shares, warrants, options, ExchangeCo shares and Stock Incentive Plan reserves to assess dilution.
  • Evaluate the effect of Mr. Pavlovski’s approximately 85% voting control and the separate economic and voting characteristics of the Class A, Class C and Class D shares.
  • Confirm the final sources and uses of transaction proceeds, including the PIPE, sponsor investment, redemptions and transaction expenses.
  • Review the pro forma financial statements and risk factors incorporated from the Proxy Statement/Prospectus, particularly regarding profitability, user growth, monetization, content liability, cybersecurity and regulatory exposure.
  • Confirm the terms and potential impact of registration rights, lock-ups, earn-out shares, exchanged options and warrants on future selling pressure and dilution.