It’s not the way social media platform Rumble (NASDAQ:RUM) imagined it would start off the new year. Since the January opener, RUM stock fell more than 28%, an apparent victim of insider selling. However, fundamental concerns — including consumer inflation — also weighed on sentiment. Still, it’s possible that the ugliness could have gone on a bit too long, potentially sparking a bounce back.
To be sure, traders have plenty of reasons to short RUM stock. For one thing, the platform tends to attract a conservative audience — as in, audiences that are seeking content edgier than can be found on YouTube. Of course, the problem with this approach is that advertisers prefer middle-of-the-road content, if anything to avoid alienating large swathes of the general populace.
Another factor weighing down RUM stock is the valuation. Priced at more than 22X trailing-12-month (TTM) sales, RUM isn’t exactly cheap. During the third quarter last year, Rumble had a much lower revenue multiple of under 14X. To return to this level, the company would have to post sales figures in 2025 that are much higher than analyst projections.
At the same time, it’s important not to lose sight of the positives. One of the potential catalysts is what makes Rumble so controversial in the first place. As a censorship-resistant platform, Rumble is in an excellent position to capitalize on concerns regarding content moderation on mainstream sites.
Further, as the 2024 election proved, conservative opinions are popular opinions. This dynamic allows Rumble to operate a sort of parallel economy — one where conservative-leaning businesses can support a framework that more closely aligns with their perspectives.
Another possible upside catalyst for RUM stock is the security’s extremely high short interest. Currently, this metric stands at 36.5% of its float, while the short interest ratio — basically the number of trading sessions required based on average trading volume to unwind all bearish positions — lands at 3.98.
On the surface, a high short interest is a pessimistic indicator — it simply means that there are either several traders or several transactions betting against the target security. However, shorts only make money when the security keeps falling. Should the stock rise, this dynamic theoretically creates the prospect of unlimited liabilities.
Should a dead-cat bounce materialize in RUM stock, it could catch the short speculators off guard. Those who decide to panic out of their positions could create upward pressure in the security, causing a positive feedback loop — also known as a short squeeze.
Statistically, it must be said that RUM stock carries a negative bias. A position entered at the beginning of the week has a 45.05% chance of rising by the end of it. Over an eight-week period, this probability hardly budges at 45.64%.
Still, RUM stock has practically been in freefall over the trailing one-month period. Combined with the excessively high short interest, the bulls could come in, if only to attempt to panic out the bears. Should more traders become aware of the shorts’ vulnerability, more speculators could attempt to spark the short squeeze.
