S-1: Newsmax Files for Potential $1.2 Billion Stock Resale by Yorkville

Newsmax Inc. has filed a registration statement for the resale of up to 25,633,636 shares of Class B common stock by YA II PN, Ltd. (Yorkville), potentially generating up to $1.2 billion through a standby equity purchase agreement.

Summary

• Newsmax Inc. has filed a registration statement with the SEC for the potential resale of up to 25,633,636 shares of Class B common stock.
• The shares are to be resold by YA II PN, Ltd. (Yorkville), a Cayman Islands exempt limited partnership.
• These shares consist of 25,624,912 shares that may be issued to Yorkville under a standby equity purchase agreement and 8,724 commitment shares already issued.
• Under the purchase agreement, Yorkville has committed to purchase up to $1,200,000,000 of Class B common stock from Newsmax, subject to certain terms and conditions.
• Newsmax will bear the costs of registering the shares, while Yorkville will cover commissions and discounts from its sales.
• The resale of these shares, or the perception of potential sales, could lead to a decline in the public trading price of Newsmax's common stock.
• Newsmax is an emerging growth company and a smaller reporting company, which allows for reduced public company reporting requirements.
• Christopher Ruddy, Newsmax's CEO, controls approximately 81.5% of the company's voting stock, making it a controlled company under NYSE rules.
• Newsmax intends to use any proceeds from the sale of shares to Yorkville for working capital and general corporate purposes.
• The market price of Newsmax's Class B Common Stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond the company's control.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the potential capital raise is positive, the risks associated with share dilution and market volatility temper the overall outlook.

Positives

• Newsmax has access to a potential $1.2 billion in funding through the standby equity purchase agreement with Yorkville.
• The company retains control over the timing and amount of share sales to Yorkville.
• Newsmax is an emerging growth company and smaller reporting company, allowing for reduced reporting requirements.
• The company intends to use any proceeds from the sale of shares to Yorkville for working capital and general corporate purposes.

Negatives

• The resale of shares by Yorkville could lead to a decline in the public trading price of Newsmax's common stock.
• Future sales and issuances of Class B common stock could result in significant dilution to existing stockholders.
• The market price of Newsmax's Class B Common Stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond the company's control.
• The company's management team will have broad discretion as to the use of the proceeds from the sale of Class B Common Stock to the Selling Stockholder under the Purchase Agreement, and such uses may not improve the company's financial condition or market value.

Risks

• The actual number of shares Newsmax will sell to Yorkville is unpredictable.
• Newsmax may not have access to the full $1.2 billion available under the purchase agreement.
• Investors who buy shares at different times will likely pay different prices.
• Future sales of Class B common stock could result in significant dilution to existing stockholders.
• The market price of Newsmax's Class B Common Stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond the company's control.
• A short squeeze due to a sudden increase in demand for shares of the company's Class B Common Stock that largely exceeds supply has led to, and may continue to lead to, extreme price volatility in shares of the company's Class B Common Stock.
• Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to the company and may not be reliable or accurate.

Future Outlook

Newsmax expects to use the net proceeds from sales, if any, under the Purchase Agreement, for working capital and general corporate purposes.

Industry Context

Newsmax operates in a competitive media marketplace, differentiating itself through broad distribution of content across linear cable, OTT streaming, and digital and print platforms, focusing on politics, health, finance, and lifestyle content for an audience primarily aged 45 or older.

Comparison to Industry Standards

• Nielsen reports that Newsmax is the fourth highest-rated cable news network in the United States, with 21 million regular viewers, and is one of the 15 most viewed basic cable programs.
• In 2023, Nielsen reported that Newsmax was the only cable news channel with ratings growth across all dayparts, seeing a 42% increase in total viewership in prime time, 16% in daytime, 23% in total day, including a 69% increase in total day viewership among adults between age 35 and 64, and an 11% increase in access.
• Meanwhile, competitor Fox News saw a 6% decline in viewership for total day and a 2% decline in prime during the same time period.
• In the first half of 2024, Newsmaxs total viewership in prime time grew by 41%, including a 10% increase among adults between the ages of 35 and 64, and by 36% in total day, including a 16% increase among adults between 35 and 64.
• In comparison, Fox News experienced a 10% increase in prime time viewership, including a 10% increase among adults between age 35 and 64, and a 2% increase in total day, including a 1% increase among adults between age 35 and 64.
• Overall, Newsmaxs total day ratings grew by 36% in the first half of 2024 compared to the first half of 2023, compared to 7% growth for MSNBC, a 2% growth for Fox News, a 3% growth for CNN, a 7% decline for CNBC and a 36% decline for Newsnation.

Stakeholder Impact

• Shareholders may experience dilution if Newsmax issues additional shares of Class B Common Stock.
• The resale of shares by Yorkville could lead to a decline in the public trading price of Newsmax's common stock.
• The company intends to use any proceeds from the sale of shares to Yorkville for working capital and general corporate purposes, which could benefit the company and its stakeholders.

Next Steps

• The SEC must declare the registration statement effective.
• Newsmax may elect to sell shares of Class B Common Stock to Yorkville under the Purchase Agreement.
• Yorkville may resell the shares of Class B Common Stock from time to time.

Key Dates

Keywords

Newsmax, Class B Common Stock, YA II PN, Ltd., Yorkville, Standby Equity Purchase Agreement, Resale, SEC, NMAX, NYSE, Emerging Growth Company, Smaller Reporting Company