SCHEDULE: Tether Deepens Rumble Ties, Backs Northern Data Acquisition

Tether Holdings and its subsidiary Tether Investments are significantly increasing their stake and financial commitment to Rumble Inc. to facilitate its acquisition of Northern Data AG.

Summary

• Tether Holdings, S.A. de C.V., Tether Investments, S.A. de C.V., and Giancarlo Devasini collectively beneficially own 103,333,333 shares of Rumble Inc. Class A Common Stock, representing 30.5% of the class.
• Rumble Inc. is pursuing a business combination with Northern Data AG through a voluntary public exchange offer, where each Northern Data share will be exchanged for 2.0281 shares of Rumble Class A Common Stock.
• Tether Investments (TINV) has agreed to sell its 41,887,776 Northern Data shares to Rumble, receiving Rumble Class A Common Stock at the specified offer ratio.
• To prevent TINV and its affiliates from exceeding a 9.9% voting limitation, Rumble will issue Pre-Funded Warrants instead of Class A Common Stock if necessary.
• TINV has committed to provide up to $200 million in equity financing for Northern Data's taxes due at or prior to the Exchange Offer closing, and another up to $200 million (less prior amounts) for taxes due post-closing for up to 18 months.
• A EUR603,000,000 receivable from Northern Data's existing loan from TINV will be transferred to Rumble's Irish subsidiary, with 50% converted into Rumble Class A Common Stock (at $7.88/share) and 50% becoming a new loan from TINV to the subsidiary.
• TINV has an option one year after closing to exchange the new loan into Rumble Class A Common Stock at the greater of the 10-day volume-weighted average price or $7.88 per share.
• TINV has also committed to offer to purchase up to approximately EUR219 million worth of Northern Data shares from other shareholders outside the Exchange Offer, subject to price conditions.

Sentiment

Score: 7

Explanation: The filing details a complex but strategically significant transaction where a major investor, Tether, is providing substantial financial backing and committing to a long-term relationship with Rumble Inc. to facilitate a key acquisition. While the complexity and past regulatory issues of Tether are noted, the overall financial support and strategic alignment are positive for Rumble's growth trajectory.

Positives

• Tether's significant financial commitment (up to $400 million in equity financing for taxes and a EUR603 million loan restructuring) provides substantial support for Rumble's acquisition of Northern Data AG.
• The transaction facilitates Rumble's strategic expansion by acquiring Northern Data AG, potentially enhancing its market position and capabilities.
• The conversion of a portion of Northern Data's loan from Tether into Rumble Class A Common Stock aligns Tether's long-term interests with Rumble's success.
• The lock-up period for shares issued to TINV (six months) provides stability for Rumble's stock post-transaction.

Negatives

• The complexity of the various agreements (BCA, Support Agreement, Equity Commitment Agreements, Sale and Transfer Agreement) introduces potential execution risks and requires careful monitoring.
• The 9.9% voting limitation, while designed to manage control, necessitates the use of Pre-Funded Warrants, which could add complexity to TINV's ownership structure and future liquidity.
• Rumble is taking on a significant loan from TINV (50% of the EUR603 million Existing Node Loan), which will need to be serviced or potentially converted into equity at a future date.

Risks

• The closing of the transactions is subject to the satisfaction or waiver of conditions to the Exchange Offer, meaning the acquisition is not guaranteed.
• TINV's indemnification obligations to Rumble are capped by a EUR25 million equivalent withholding from the Share Consideration, potentially limiting Rumble's recovery for larger damages.
• The issuance of Pre-Funded Warrants due to the 9.9% voting limitation could introduce complexities in TINV's beneficial ownership and potential future conversion.

Future Outlook

Rumble Inc. is moving forward with a strategic acquisition of Northern Data AG, supported by significant financial and equity commitments from Tether Investments. The transaction is structured to integrate Northern Data's operations and financial obligations into Rumble, with potential for further equity conversion of a substantial loan from Tether in the future. The various agreements outline a clear path for the business combination and the ongoing relationship between Rumble and Tether.

Management Comments

• Giancarlo Devasini, President of Tether Holdings and Sole Administrator of Tether Investments, signed the filing, indicating his direct involvement and oversight of these strategic transactions.

Industry Context

This transaction positions Rumble Inc. for significant expansion, potentially into new areas or by strengthening existing capabilities through the acquisition of Northern Data AG. Given Tether's role as a major stablecoin issuer and its increasing investments in various tech and infrastructure companies, its deep financial backing of Rumble's acquisition signals a strategic alignment and confidence in Rumble's growth trajectory. The deal could enhance Rumble's competitive standing in the digital platform and infrastructure sectors, especially if Northern Data's assets complement Rumble's existing business.

Comparison to Industry Standards

• The use of a voluntary public exchange offer for the acquisition of Northern Data AG is a standard method for cross-border mergers and acquisitions, similar to how many tech companies expand their global footprint.
• The implementation of a 'Voting Limitation' (9.9%) and the use of 'Pre-Funded Warrants' are common mechanisms in strategic investments to allow a large investor to provide significant capital and economic interest without immediately triggering certain regulatory thresholds or control provisions, often seen in investments by sovereign wealth funds or large institutional investors in publicly traded companies.
• The structure involving a combination of equity issuance and loan restructuring (EUR603 million Existing Node Loan) is typical for complex M&A deals, allowing for flexible financing and integration of existing financial relationships, comparable to financing structures seen in large-scale infrastructure or technology acquisitions by companies like Microsoft or Amazon.

Corporate Governance

Legal Proceedings

• In October 2021, the U.S. Commodity Futures Trading Commission (CFTC) settled regulatory proceedings against Tether Holdings, Tether Limited, Tether Operations Limited, and Tether International Limited, resulting in a $41 million civil monetary penalty for misleading statements about USDT backing from June 2016 to February 2019.
• In February 2021, the Office of the Attorney General of the State of New York (NYAG) settled a 2019 proceeding with Tether and Bitfinex companies, resulting in $18.5 million in penalties and an agreement to discontinue trading with New York persons/entities and submit to mandatory reporting.

Related Party Transactions

• Tether Investments (a wholly-owned subsidiary of Tether Holdings) is selling its 41,887,776 Northern Data AG shares to Rumble Inc. in exchange for Rumble Class A Common Stock.
• Tether Investments is providing up to $400 million in equity financing commitments to Rumble Inc. for Northern Data's tax liabilities.
• A EUR603,000,000 receivable from Northern Data's existing loan from Tether Investments is being transferred to Rumble's subsidiary, with 50% converted into Rumble Class A Common Stock and 50% becoming a new loan from Tether Investments to Rumble's subsidiary.
• Tether Investments has an option to convert the new loan into Rumble Class A Common Stock one year after the closing.
• Tether Investments has committed to offer to purchase up to approximately EUR219 million worth of Northern Data shares from other shareholders outside the Exchange Offer.

Stakeholder Impact

• **Shareholders (Rumble Inc.)**: Potential for dilution from new share issuances to Tether, but also strategic growth from the Northern Data acquisition and strong financial backing from a major investor. The 9.9% voting limitation aims to mitigate immediate control concerns.
• **Shareholders (Northern Data AG)**: Opportunity to exchange their shares for Rumble Class A Common Stock, providing liquidity and exposure to a U.S.-listed company. TINV's commitment to purchase shares outside the offer provides an alternative exit.
• **Employees (Rumble Inc. & Northern Data AG)**: Potential for integration challenges and opportunities as two companies combine, but also stability from the financial commitments.
• **Creditors (Northern Data AG)**: The EUR603 million loan from TINV is being restructured, with a portion converted to equity and the remainder becoming a loan to Rumble's subsidiary, potentially altering the credit profile and obligor.
• **Tether Holdings/Investments**: Significantly increases its strategic investment and influence in Rumble, aligning its financial interests with Rumble's long-term performance, while managing voting control through warrants.

Next Steps

• Rumble Inc. will submit a voluntary public exchange offer to Northern Data AG shareholders.
• The closing of the transactions contemplated under the Support Agreement will occur immediately prior to the closing of the Exchange Offer, subject to conditions.
• Simultaneously with the Closing, Rumble and TINV will amend and restate their registration rights agreement.
• Simultaneously with the Closing, Rumble and TINV will enter into an amendment to their Transaction Agreement.
• One year after the closing of the Exchange Offer, TINV will have an option to exchange the TINV/Issuer Loan into Rumble Class A Common Stock.

Key Dates

Recommendation

This filing details a complex, strategic acquisition by Rumble Inc. backed by significant financial commitments from Tether. While the acquisition of Northern Data AG and Tether's deep involvement could be long-term positives for Rumble's growth and strategic positioning, the immediate impact involves substantial share issuance, loan restructuring, and the complexity of managing a large investor with a voting limitation. The past regulatory issues of Tether, though settled, add a layer of scrutiny. Given the intricate nature of the deal and the time required for integration and realization of synergies, a 'hold' recommendation is appropriate for investors to observe the execution and initial performance post-acquisition before making further commitments. The potential for dilution and the long-term implications of the new loan structure warrant a cautious approach.

Keywords

Rumble Inc., Tether Holdings, Tether Investments, Northern Data AG, Business Combination Agreement, Exchange Offer, Class A Common Stock, Equity Commitment, Loan Transfer, Pre-Funded Warrant, Corporate Acquisition, SEC Filing, Schedule 13D