Newsmax Cements Meme Stock Status

Conservative media outlet Newsmax Inc. is having a meme-stock moment, with shares surging more than 2,000% since its debut as a public company on Monday.

The stock soared more than 150% to $215 at 2:02 p.m. in New York on Tuesday, building on a 735% surge in its debut session which saw the shares halted multiple times. Tuesday’s swings between $114.22 and $215 came as more than seven million shares swapped hands, with five halts for volatility triggered in the first 70 minutes of the session.

The spike has made the company’s largest holders exceptionally rich — on paper. Founder and Chief Executive Officer Christopher Ruddy owns nearly one-third of the company’s shares, worth $8.4 billion. Interactive Brokers Group Inc. founder Thomas Peterffy owns the second-largest stake, now worth nearly $5 billion.

The surge is reminiscent of the meme stock craze in 2020 and 2021, with investors piling into stocks to power eye-popping gains and leaving conventional estimates of their fundamental value far behind. In 2021 and 2022 shares of more than a dozen companies saw similar spikes immediately after their IPOs, many of which were tiny. Speculators on and off Wall Street drove the firms’ shares skyward, before ultimately plunging more than 90%.

“This is like the initial market reaction to DJT on steroids,” said Steve Sosnick, chief strategist at Interactive Brokers, said referencing the surge in shares of President Donald Trump’s media company, Trump Media and Technology Group Corp., which trades under his initials.

“This is the newest entry into the pantheon of meme stocks,” Sosnick said. “Whether or not that persists, who knows, but it has all the hallmarks of a meme stock. There needs to be some sort of passion to enable investors overlooking fundamentals, and Newsmax fits that bill.”

‘Retail Bag Holders’

Individual investors traded barbs on the popular trader chatroom Stocktwits, where its symbol was the top trending ticker, throughout Tuesday morning. Bullish investors posted memes mocking critics while others called it the “New GME” and touted their easy returns. Users posted memes and GIFs alongside calls for the shares to surge to $200, $500 and even $1,000 apiece, without providing an investment thesis.

Bearish traders urged a desire to short the stock while comparing it to previous high fliers that plunged, saying that “retail bag holders” were “being minted.”

Fidelity users were mostly buyers, with the stock among the 10 most popular with investors as of 1:01 p.m. in New York. Orders to purchase the stock topped those to buy shares of retail trader favorites Palantir Technologies Inc. and Meta Platforms Inc.

Skeptics see Newsmax joining a cohort whose shares spiked in their first few sessions as a public company. Just seven other stocks ended their debut sessions up more than 700% after a US IPO in the past five years, delivering returns to well-timed trades. Such firms have been losers in the long run, with shares of the average company in the group down nearly 94% from

Facing Litigation

The cable network is still facing litigation that could impact its bottom line, over broadcasts claiming voting technology companies rigged the 2020 presidential election against Trump. Newsmax settled a defamation lawsuit with Smartmatic Corp. according to an announcement in September. A suit from Dominion Voting Systems Corporation Inc. is ongoing, however, its filing shows. Dominion is seeking up to $1.6 billion in compensatory damages as well as punitive damages, and a trial is expected to begin as soon as April 28. Newsmax believes the case is without merit and will continue to defend against the suit, according to the filing.

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