Why Newsmax Stock Is Crashing Today

Motley Fool04-10
  • A judge ruled that the cable news channel had made defamatory statements about Dominion Voting Systems.
  • The lawsuit will now be heard by a jury and could end in a steep penalty for the company.
  • The company's earnings and balance sheet don't justify its current stock price.

Shares of Newsmax Media (NMAX -24.23%) are plunging on Thursday. The media company's stock lost 23.5% as of 1:40 p.m. ET and was down as much as 24.5% earlier in the day. The steep decline comes as the S&P 500 (^GSPC -3.90%) and Nasdaq Composite (^IXIC -4.65%) both lost more than 5%.

A Delaware judge ruled that the company made defamatory statements about Dominion Voting Systems, sending the case to trial.

Delaware court delivers legal blow

Newsmax suffered a significant setback in a major lawsuit on Wednesday. Judge Eric M. Davis of the Delaware Superior Court ruled that the cable news channel had made defamatory statements about Dominion Voting Systems when it falsely claimed the company rigged votes in the 2020 presidential election. The judge stated that Dominion presented "clear and convincing evidence" that Newsmax's statements were false and would "likely cause reasonable viewers to think significantly less favorably about Dominion than if the viewers knew the truth."

The case will now be heard before a jury, which will decide whether Newsmax knowingly broadcast the falsehoods and, if so, determine the extent of the damage. Newsmax could face a significant monetary penalty on top of the expensive legal fees it will incur to defend itself. In a similar suit, Fox News settled with Dominion for nearly $800 million.

Newsmax is overvalued

The costs involved come at a time when the company is already struggling financially. Newsmax is operating deep in the red, losing $72 million on $171 million in sales. Despite the lackluster numbers and an equally poor balance sheet, the company's recent initial public offering (IPO) saw its stock price skyrocket before returning to current levels.

Even after the decline, however, the stock is still incredibly overvalued. I plan to stay far away from this stock.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment