Newsmax, a conservative media company, became a meme stock after its IPO skyrocketed by 2,190%, bringing its market valuation to over $20 billion.
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00:00On Monday, Newsmax was worth $10 billion.
00:03On Tuesday, it was worth $20 billion.
00:06And now, as I'm recording this, it's worth $5 billion.
00:09So what's Newsmax, and what's going to happen next?
00:11The first question is pretty easy to answer.
00:13Newsmax is a small, conservative news channel that positions itself as a rival to Fox News.
00:18And as of this week, when it started publicly trading, it's now a meme stock, something
00:22that small retail investors buy and sell based on ideology or values, much more than a company's
00:28financials.
00:29The thing about meme stocks is they kind of trade up and down, really for no reason.
00:33They often trade up and up and up.
00:34Eventually, though, reality generally settles in, the fad fades, and the stock comes down.
00:39Take a look at Truth Social.
00:41That was a big meme stock about a year ago.
00:44Value got up to about $10 billion.
00:46It's gone all the way down to about $4 billion.
00:49Okay, so what about Newsmax the company?
00:51Well, if you're an investor, there are reasons to be concerned.
00:55Newsmax doesn't have a lot of revenue.
00:56It does have significant losses.
00:58It's a company that's directly tied to the cable TV business.
01:01The cable TV business is in freefall.
01:04Newsmax has had to pay out a meaningful settlement to make a defamation lawsuit go away.
01:09The upside, I think, would go something like this.
01:11Newsmax is small, and it's much smaller than Fox News, but Fox News doesn't necessarily
01:15have to be Fox News forever.
01:17Who knows what's going to happen in the future?
01:19So that's the upside for Newsmax.
01:21And maybe that's going to pan out one day, but it probably still won't be worth what
01:25it's trading for today.