What happened

Shares of Rumble (RUM -3.02%) -- a video platform seen as a censorship-proof alternative to YouTube -- plunged on Wednesday after the company filed a registration document with the Securities and Exchange Commission (SEC). As of 1 p.m. ET, Rumble stock was down 10%.

So what

Rumble officially went public on Sept. 16 when it completed its business combination with a special purpose acquisition company (SPAC). At the time, not much was known about the company's financials. However, with today's filing investors now know Rumble generated just $8.4 million in revenue in the first half of 2022 and racked up an $8.6 million loss from operations during that time. That's meager revenue for a company valued at $2.6 billion at the time it went public.

When Rumble officially went public last month, there were about 280 million shares outstanding. However, investors are understandably confused about the purpose of today's registration filing. Rumble's social media team issued a statement this morning saying the company is not raising new money or changing lockup agreements with today's registration statement, which is important to note. 

However, it's also important to note that only about 30 million shares of Rumble were on the market prior to its business combination. Per the company's SPAC presentation, almost 90% of the outstanding share count was held by insiders, private investors, and the merger's sponsors. And more shares were set aside for executives and employees when certain conditions are met. These are now registered and can be sold when lockup arrangements expire. And Rumble won't get any more money if they choose to sell.

Now what

Rumble's ownership structure is common among SPAC stocks, so there's nothing out of the ordinary here today. However, this dynamic is why many SPAC stocks fall hard within one year of going public. Retail investors own very little of the overall share count to begin with and there's immense selling pressure once lockup periods expire.

Of course, this doesn't mean that insiders will necessarily sell once they're able to. They could hold forever if they choose. In Rumble's case, founder and CEO Chris Pavlovski is only 39 years old and holds nearly 45% of Rumble's Class A shares, meaning he could be with the company a long time and potentially hold his stake for years.

Since investors can't know with certainty what Pavlovski and company will do with their shares in the future, it's more important to focus on Rumble's business. It has over $300 million to work with thanks to going public. But at just about a $17 million annual revenue run rate, the company has a lot of work to do to grow into its lofty multibillion-dollar valuation.