Conservative news channel Newsmax raised $75 million Monday by offering 7.5 million shares at $10. This was not technically an IPO, it was a Regulation A offering. Reg A+, as it is called, was established in 2015 under the JOBS Act. It allows small companies to raise capital, but without undergoing the full SEC registration process. The idea was to reduce cost and administrative burdens. Issuers still must file audited financial statements and provide ongoing reports . In Reg A+, an advisor sells as many shares as possible up to the maximum offered. The primary focus is to sell to retail investors, in this case It was sold to approximately 30,000 retail investors. Digital Offering was the lead selling agent. The stock opened at $14, closed at $85 on the first day, closed Tuesday at $233, and was trading around $125 Wednesday midday. NMAX 5D mountain Newsmax (NMAX) Why the enormous pop? One factor may be what Wall Street calls the “float,” or shares available for trading. Only 7.5 million shares out of a total of 128 million fully diluted shares, that is a very small float of less than 6%. It’s also not clear if all the 7.5 million shares floated was actually delivered to retail investors and available to trade, if not that could have contributed to the price rise. With such a small fraction available for trading, not much could spark a sharp move in the shares. But the simplest answer may be, don’t underestimate the power of a meme stock. First, there is a community that wants to support alternative media, and they were the primary initial buyers of the stock. Second, just the fact that it has a big one day pop gets the attention of momentum traders who drive up the stock even more. Of course, momentum works in the opposite direction as well, as can be seen Wednesday.
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