Trump effect? Newsmax (NMAX) stock soars 500% on NYSE debut as right-wing media demand surges

Newsmax, the conservative cable news network, made its public debut on the New York Stock Exchange on Monday, defying market trends with an explosive opening.

Trading under the symbol “NMAX,” the stock opened at $14 after being priced at $10 per share.

By midday, it had soared more than 500% in volatile trading, attracting comparisons to past speculative frenzies seen in so-called meme stocks.

The IPO raised $75 million through the sale of 7.5 million Class B shares, marking a rare instance of a standalone television network going public in the US.

Dealogic data indicates that no comparable cable news IPO has occurred in recent decades.

Newsmax’s listing comes at a time when traditional cable television faces increasing pressure from streaming platforms.

Yet, live news and sports continue to draw strong viewership, making them attractive targets for advertisers.

The network’s audience has expanded in recent years, fuelled by the rise of Donald Trump and other right-wing politicians.

Retail investors drive speculation in NMAX

The dramatic surge in Newsmax’s stock price quickly caught the attention of retail traders.

Online forums and social media platforms, including Reddit and Stocktwits, saw a wave of posts likening the stock to GameStop’s 2021 rally.

One Reddit user commented that Newsmax shares were being “sent to the moon,” a reference to the speculative trading craze that drove up struggling stocks like GameStop and AMC Entertainment.

While institutional investors have been cautious about Newsmax’s financial health, retail traders appeared undeterred.

The network reported a loss of more than $55 million in the first half of 2024 on a revenue of $80 million, according to regulatory filings.

It also listed $142 million in total liabilities against $69 million in assets.

The surge in Newsmax’s stock price mirrors past IPO booms that saw early sky-high valuations collapse over time.

Analysts noted that two dozen companies that posted similar 300%-plus gains on debut have since fallen by an average of 85% from their IPO prices.

A challenger to Fox News

Christopher Ruddy, Newsmax’s founder and CEO, described the IPO as a strategic move to position the network as a competitor to Fox News.

“I think there was a demand for more competition against Fox,” Ruddy said on CNBC’s “Squawk Box” on Monday.

He emphasized that while Fox dominates right-wing media, Newsmax had carved out its own audience as the fourth-largest cable news network behind CNN, MSNBC, and Fox News.

Nielsen ratings confirm that Newsmax consistently ranks fourth in cable news viewership, and overall, it is among the top 20 cable networks in both prime-time and daytime ratings.

Newsmax initially started as a digital news outlet in 1998 before evolving into a cable channel in 2014.

The company has grown its revenue model by securing licensing fees from major pay-TV providers.

In 2023, it resolved a dispute with DirecTV, which had briefly dropped Newsmax over fee negotiations.

Analysts question long-term viability

Despite the initial stock frenzy, analysts caution that Newsmax’s business model faces challenges.

Traditional cable news networks have struggled with declining subscriptions as more viewers turn to streaming.

Fox News, CNN, and MSNBC have diversified their offerings, while Newsmax remains heavily reliant on cable distribution.

The company’s pro-Trump reputation has also drawn scrutiny.

Last year, Newsmax reached a $40 million settlement with Smartmatic over false claims that the voting machine company rigged the 2020 election.

However, Ruddy sought to downplay Newsmax’s political leanings during the IPO launch.

“We believe we’re conservative with an independent news mission and ask tough questions of the Trump administration,” he said.

Following Newsmax’s market debut, Trump personally called Ruddy to discuss the company’s future.

In a social media post, Ruddy shared that their conversation touched on the IPO, adding: “I shared with Potus my new saying: ‘A rising Trump lifts all boats!’”

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