For humans and AI trading the stock, it’s just a spectacularly fun video game. For observers, it proves this market is dangerously nuts.
By Wolf Richter for WOLF STREET.
The craziness of this situation is hard to convey with a straight face. “Craziness” is probably the understatement of the year. It shows just how nuts this joint called the stock market is. It’s like whatever.
Newsmax [NMAX] went public via IPO on Monday March 31. At the IPO price of $10 a share, it raised $75 million, which seemed reasonable enough for an IPO of this type. Then out the gate, it started trading at over $14 a share, and that would have been a nice first-day pop of over 40%, but then some stock jockeys and AI got a hold of it, and WOOSH. By the end of the day, it was at $83 a share. Intraday on April 1 Fools Day, it spiked to $279 a share, up by 2,600% or whatever from the IPO price of $10 a share. And then it imploded.
It is currently trading at about $50 a share, down by over 80% from the all-time high yesterday and has thereby earned a place in our pantheon of Imploded Stocks. To make it into the Imploded Stocks, shares have to have plunged by 70% or more from the all-time high. Normally, it takes companies quite a while to accomplish this.
The Newsmax trade may be a record in terms of overall craziness, up 2,600% or whatever in less than two days, and then down by 80% in a little over one day, and straight from IPO into our Imploded Stocks in three days.
At the peak, the stock had a market capitalization of about $21 billion, which is unspeakably huge for a media company and purveyor of supplements and insurance products with $171 million in annual revenues.
By comparison, the media empire News Corp has a market cap of $16 billion, but it has annual revenues of $10 billion, about 58x more than Newsmax’ revenues. And it had $354 million in net income. It owns, among other things, the Wall Street Journal, Dow Jones & Company, book publisher HarperCollins, some big UK publications, real estate publications including realtor.com, etc.
So pushing the share price of Newsmax to a market cap of $21 billion in no time shows the extent of this nuttiness. It’s really just like whatever. It’s just a video game. Have fun and go home.
Even at $50 a share, Newsmax is up by 440% from its IPO price, which is still huge, and still a huge market capitalization for a company like this.
Newsmax is not a big company. And it’s not profitable either. According to its annual report filed with the SEC on the day of the IPO:
- 2024 revenues: $171 million; net loss $72 million.
- 2023 revenues: $135 million; net loss $42 million.
Obviously, none of that mattered. The humans and AI that were trading it didn’t care one iota about the company, its puny revenues, or its losses. It was just a spectacularly fun video game. But for observers, it proved once again that this market is dangerously nuts.
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