Newsmax Share Price Plunges 21% as SEC Okays Massive Stock Sell-Off
Newsmax’s Share Price Drops by Nearly 21% in May Amid SEC Approval for Massive Share Sale
Newsmax, the media company that made a splash on the stock market earlier this year, continued to experience a decline in its share price throughout May. The company’s Class B common stock, which trades on the Nasdaq, saw a significant drop of almost 21% during the month, largely due to an announcement made by Newsmax as the month was coming to a close.
The SEC Approves Mass Share Sale
On the final Thursday in May, Newsmax announced that it had received approval from the Securities and Exchange Commission (SEC) for a potential massive sale of its Class B common stock. The company is effectively unlocking up to nearly 121.3 million shares, which are owned by a variety of individual and institutional investors. This number of shares is significantly larger than the current level of shares outstanding (89.6 million), according to data from Yahoo! Finance.
Shareholder Dilution: A Major Concern
The potential sale of such a large number of shares could have a significant impact on Newsmax’s share price, as it would result in shareholder dilution. This is a major fear for any investor, particularly one that has invested in a relatively new stock like Newsmax. The company made its debut on the Nasdaq just after its initial public offering (IPO) on March 31.
Investors Focus on Negative Developments
While Newsmax’s negative news may have overshadowed some positive developments during the month, investors were likely more focused on the potential consequences of the massive share sale. This announcement came on top of a significant bottom-line loss in Newsmax’s first earnings release as a publicly traded company. The deficit for the first quarter was over $17 million, which was narrower than the nearly $51 million loss in the same period of 2024 but still significant compared to overall revenue.
Revenue Growth and Positive Developments
It’s worth noting that Newsmax did post some positive developments during the month. One notable achievement was its signing of a multiyear deal with top video streamer Hulu, which will carry Newsmax on its Hulu+ Live TV service. This partnership is expected to help boost the Newsmax viewer base. Additionally, Newsmax announced that it had surpassed 20 million followers across its social media sites.
Investment Considerations
Given the volatility and relatively new nature of Newsmax’s business, many investors are still trying to determine how best to value the company. Whether or not it’s a good idea to invest in Newsmax right now is uncertain. Some analysts have suggested that it may be wise to wait until there is more clarity on its ultimate potential.
What Investors Should Consider Before Buying
Before investing $1,000 in Newsmax, investors should consider several factors. The Motley Fool Stock Advisor analyst team has identified 10 stocks that they believe are good buys for investors now, and Newsmax was not among them. These stocks could potentially produce significant returns in the coming years.
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