Why Newsmax Stock Surged 15% Higher Today

Key Points

• The right-leaning media company has settled a large defamation lawsuit filed against it.

• It will pay $67 million per the terms of the arrangement.

• 10 stocks we like better than Newsmax ›

On a rather forgettable Monday for the stock exchange, the performance of media company Newsmax (NYSE: NMAX) was exceptional. On news that it had settled a high-profile lawsuit, relieved investors piled into the stock to lift it to a 15% gain on the day. This made it quite the outlier, as the S&P 500 index essentially closed flat that trading session.

Making peace for $67 million

That morning, Newsmax announced that it had reached a settlement with Dominion Voting Systems, which in 2021 brought a defamation lawsuit against the company. Dominion accused Newsmax of making defamatory statements about its business, particularly in connection with its involvement in the 2020 presidential election. The settlement amount is $67 million.

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Newsmax said that this figure would be paid out in installments over the course of three of the company's fiscal years. It added that the payments would be funded through its revenue.

While $67 million is a considerable amount, it's far less than the $1.6 billion in damages Dominion was originally seeking. It's little wonder that investors were so cheered by the news.

Settlements are the way

In its press release on the settlement, Newsmax continued to insist that it was not in the wrong. It wrote that "it was critically important for the American people to hear both sides of the election disputes that arose in 2020. We stand by our coverage as fair, balanced, and conducted within professional standards of journalism."

This lawsuit isn't the only significant one Newsmax has seen fit to settle with opponents recently. Earlier this year it agreed to pay around $40 million in cash and grant a five-year warrant for 2,000 shares of preferred stock to Smartmatic, another voting systems company that brought a similar lawsuit against the media company.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.