Conservative media company Newsmax (NMAX -0.50%) has taken investors on a wild ride in its first few months on the stock market. Shares were priced at $10 for the company's initial public offering (IPO) on March 31, 2025, but rocketed as high as $265 a day later. Most of those gains have since been wiped out, as the stock trades at about $14 at the time of this writing on July 21.
Dramatic gains or losses are sometimes a precursor to a stock split. Let's examine why companies split their stocks and see if that's a move to expect from Newsmax anytime soon.
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The mechanics of a stock split
When a company conducts a forward stock split, the number of outstanding shares increases, while the share price decreases by a proportional amount, leaving the company with the same overall value. For example, if a company that's trading at $1,000 a share conducts a 10-for-1 stock split, the number of shares is multiplied by 10. For every one share an investor holds, they receive an additional nine shares. The share price is divided by 10, bringing it down to $100. So, if you owned one share valued at $1,000 to start, after the split you own 10 shares valued at a total of $1,000.
A forward stock split is generally considered a good sign. The company's share price has gotten high enough to warrant a split, and by lowering the share price, the company could increase trading volumes and attract more investors.
There's also a reverse stock split, which works in the opposite fashion. The number of shares decreases, and the share price increases. Imagine a company that's trading at $5 per share conducts a 1-for-5 reverse split. Investors would receive one share for every five shares they previously owned, and the share price would increase to $25.
Unlike forward splits, reverse splits aren't a positive development. Companies normally conduct reverse splits when their share prices have dropped too much, and their stock is in danger of being delisted from its exchange.
Will Newsmax stock be the next to split?
If Newsmax had kept its positive momentum going, it may have eventually decided to split its stock as its price would have been skyrocketing. But with how much the share price has dropped, a forward stock split isn't going to happen.
A reverse stock split could be a possibility if Newsmax falls even further. It's not in any danger of being delisted -- the New York Stock Exchange only requires companies to maintain a share price of at least $1 -- but a low share price (under $10) can be a red flag for investors.
Considering that Newsmax went public fairly recently, it will probably want to avoid spooking investors with a reverse split. Its share price is still fine for the moment, although this company isn't exactly on the firmest footing.
Newsmax stock is a risky investment
Even at Newsmax's current share price, it's far from "on sale." With $171 million in revenue last year and a market cap of $1.9 billion, it's trading at a price-to-sales (P/S) ratio of about 11. Fox, the parent company of its biggest competitor, trades at 1.5 times last year's sales. To Newsmax's credit, its revenue was up 26% year over year in 2024. But it also lost $72 million, 73% worse than its losses in 2023.
Newsmax leans heavily to the right politically, an approach that can draw a large base of loyal viewers. Viewership numbers seem to indicate that the strategy is working. In Q1 2025, Newsmax's audience grew by 50% year over year to 33.6 million viewers. The news company's management has also landed distribution deals that should continue to grow its audience. It inked deals with YouTube TV last year and Hulu+ Live TV in May. Newsmax is also a flagship channel on President Donald Trump's streaming platform, Truth+.
While Newsmax is appealing to conservative viewers, some stories have landed the company in hot water. Most notably, voting systems suppliers Dominion and Smartmatic sued Newsmax for defamation regarding election fraud stories in 2020. Newsmax agreed to pay $40 million to Smartmatic last year, but the Dominion lawsuit is still ongoing. A similar result would be another sizable hit to Newsmax's bottom line.
Newsmax stock is volatile, and being that it's a young stock, projecting where it will go from here is challenging. The odds of an upcoming forward stock split are almost nil, and a reverse split isn't likely, barring a serious decline. It could rebound if it's able to start shrinking its losses and if it avoids further legal issues, but it's not a company I'd invest in at the moment.
