Newsmax stock: “One of the biggest manias you will ever see”

Who said cable TV was dead? Right-wing cable network Newsmax (NMAX) is trading like a meme stock two days after debuting on the New York Stock Exchange.

In its first two days as a public-listed company, Newsmax stock surged more than 2,000%. During the peak of the mania, the company’s market cap reached $30 billion, exceeding that of rival network Fox Corporation.

Newsmax raised $225 million in a private preferred offering earlier this year and collected another $75 million last week by selling 7.5 million shares at $10 a pop. All those investors are now in the green.

“This is the newest entry into the pantheon of meme stocks,” said Steve Sosnick, the chief strategist at Interactive Brokers.

Market analyst Charlie Bilello also chimed in, calling Newsmax “one of the biggest manias you will ever see.”

In its first 48 hours of trading, Newsmax’s market cap grew larger than 235 companies listed on the S&P 500, said Bilello. Meanwhile, its trailing 12-month sales, which provides a rolling measurement of its performance, are lower than all of those companies, he said.

In other words, Newsmax’s financials are lackluster and nothing justifies its current valuation.

Even more perplexing are the reasons Newsmax decided to go public in the first place.

As CNN reported, the company made a series of election fraud claims during the 2020 presidential election and needed to raise cash to fend off defamation lawsuits from Dominion Voting Systems and Smartmatic.

That doesn’t necessarily inspire confidence in the company’s trajectory.

Right place, right time

Newsmax is by no means a new company. It launched as a digital media organization in 1998 and expanded to cable TV in 2014.

Much of Newsmax’s recent success can be chalked up to being in the right place at the right time to capitalize on the “multiplicity of voices” emerging on the American right, according to Jonathan Miller, the CEO of Integrated Media.

“This shows there continues to be financial support for all things MAGA,” he said.

Although Newsmax claims it will hold the president’s feet to the fire, it has certainly fed off the momentum of Trump 2.0.

After speaking with the president on the phone, Newsmax CEO Christopher Ruddy exclaimed on social media, “A rising Trump lifts all boats!”

Since Trump was elected for his second term, Newsmax has solidified its place as the fourth-largest cable news channel in the U.S., according to Nielson.

However, in terms of raw viewership numbers, Newsmax is nowhere near Fox’s levels. This suggests that after the initial euphoria, financials and fundamentals will play a bigger role in how Newsmax stock is priced.

If Newsmax is indeed a meme stock, investors should brace for the possibility that it all ends in tears.