NewsMax By the Numbers

There's NewsMax the web site, NewsMax the magazine and NewsMax the infomercial. Are you ready for NewsMax the IPO?

It's coming. NewsMax Media Inc., the parent company of all things NewsMax, filed its intention with the Securites and Exchange Commission in March to issue 1 million shares of stock to the public with the intention of raising about $5.7 million assuming an proposed offering price of $7 a share.

In the past, NewsMax has been tight-lipped about its ownership and finances. But doing an IPO requires all sorts of filings with SEC, all the way down to building leases and employment contracts. The most interesting of these documents by far is the preliminary prospectus on file that details, among other things, NewsMax's finances and ownership.

NewsMax has lost a lot of money. Nearly $11 million, in fact, since the site's launch in 1998. NewsMax lost roughly $8.4 million of that in 2000 and 2001.

The majority of NewsMax's revenue in 2001 came from product sales -- 52.8 percent, compared to 19.5 percent in 2000. That jump mirrored a huge drop in advertising revenue, from 42.3 percent of total revenue in 2000 to 15.9 percent in 2001.

Richard Mellon Scaife has a stake in NewsMax. According to the prospectus, Scaife owns about 7.2 percent of NewsMax Media, expected to drop to 5.8 percent after the IPO. That's not exactly surprising, given that CEO Christopher Ruddy used to work for Scaife at his newspaper near Pittsburgh. Scaife's official stake -- and you have to wonder, given Scaife's reputation as the moneybag behind a lot of hardline conservatives, if he didn't kick in even more than his official share of the company indicates -- makes him NewsMax's third largest shareholder. At the top is Ruddy, with 32.6 percent (27.1 percent after the IPO), followed by Michael Ruff (with 25 percent, or 20.3 percent after the IPO), described in the prospectus as a former real estate developer in Dallas and current president of Icarus Investments, a venture capital firm. There are a total of 190 stockholders of record.

All totaled, Ruddy and the company's directors -- who also include Arnaud de Borchgrave, late of the Washington Times; former Navy admiral Thomas Moorer; and Lord William Rees-Moog, a former editor and current columnist for the Times of London -- control about 64 percent of NewsMax Media through stock ownership and stock options, which would drop to 53.5 percent after the IPO. Interestingly, Scaife is not listed as a company director, but his stock is counted with the rest of the other named directors.

Christopher Ruddy is doing pretty well for running a company that has lost $11 million. According to the prospectus, Ruddy made about $97,000 plus stock options in 2001. The previous year he made $65,000 with a $30,000 bonus. (In 1999, he's listed as making no salary but a $10,000 bonus and a million-plus shares of stock and stock options.) So that's how he can afford to be seen in swank New York eateries. Ruddy's salary for 2002 is described thusly: "Mr. Ruddy's annual base salary ... is $125,000, which was reduced to $25,000 effective February 2002, but will be restored to $125,000 upon the closing of this offering."

NewsMax hasn't exactly been, uh, honest about some of these numbers. Ruddy once claimed NewsMax became profitable in November 2000; please refer to the earlier paragraph for proof otherwise. NewsMax also claimed in January that the paid circulation of its magazine was 240,000, and in a recent e-mail to readers, claimed "more than 300,000 paid readers ... We have just surpassed almost every conservative publication in America." But according to the prospectus (filed in March, if you'll recall), the paid circulation is listed as "approximately 59,395." Perhaps NewsMax understands that while you can get away with lying to magazine reporters and your own readers, it's generally a bad idea to lie to the government.

The NewsMax demographic is surprisingly affluent. According to the prospectus, data collected in 2000 shows that NewsMax's "user base" has some money and power: 70 percent with an annual income of more than $50,000; 25 percent with a net worth of more than $500,000; 25 percent are "top level management/executives/directors."

So, is this a stock worth investing in? Maybe not if you're counting on making any actual money from it. Aside from the typical disclaimers that no return on investment is assured and the board of directors can do whatever it wants with the money whether it's good for the company or not, there's this one: "You will suffer immediate dilution of approximately 81.1 percent of your investment." That doesn't sound good. Neither does a mention of a 1:3 reverse stock split.

The prospectus also issues one more caveat: "Our ability to compete depends on many factors, including the originality, timeliness, comprehensivemess and trustworthiness of our content ..." Let's see. Running Judicial Watch press releases as NewsMax articles fails on originality, and its heavy bias in telling stories with a conservatives-good, liberals-bad slant knocks them out in the comprehensiveness and trustworthiness department.

Should anyone by stock in NewsMax? I solicited the opinion of an investor with years of experience in the stock market who knows how to read a prospectus, and here's what he said:

This company is no better than the hundreds of dot.com startups from the 1990s that failed because they had no real way of increasing shareholder value. They did lots of marketing as NewsMax plans to do, but they had no way of capturing a profitable return on those marketing gimmicks. NewsMax has subscription fees, but there is still too much free stuff on the Internet. And it's hard for NewsMax to compete when its news and commentary isn't as comprehensive as, for instance, salon.com. The IPO is way to borrow from Peter to pay Paul, but Peter will walk away fooled, gypped, left with nothing but worthless shares. Ruddy keeps making money off the backs of ignorant stockholders. When are stockholders going to stand up and ask for real shareholder value, real profits, real cash in the bank, real significant assets (not just a few computers). Good companies such as Berkshire Hathaway have real cash ($40 billion in Berkshire). NewsMax has nothing but air, pie in the sky, emptiness.

(Speaking of Salon.com as my investor friend did, it's worth pointing out that NewsMax seemed to be hoping for failure when Salon started charging for some of its content last year, gleefully noting that the "blatantly pro-Clinton" site's stock "has plunged into the basement" and, later, happily reporting when Salon's stock was about to be delisted by Nasdaq.)

Potential investors in NewsMax might want to ask Ruddy and other company officials exactly how much money Richard Mellon Scaife has kicked in, who exactly are those 190 shareholders of record and whether any of them are anything other than rich conservatives with a little money to throw away or folks given a little piece of the action in exchange for their (Clinton-bashing) stories -- Larry Patterson comes immediately to mind. And there's one more question that's worth asking: whether kneejerk conservatism and Clinton-bashing is really enough to sustain a publicly owned company.

Ahhhh yes, Salon.com... FYI: As posted at... http://www.salon.com/politics2000/feature/2000/01/25/bauer/ The merry prankster / Stalking Gary Bauer Sex columnist Dan Savage goes undercover, and hatches a plot, inside Bauer 2000 campaign headquarters in Des Moines. By Dan Savage Jan. 25, 2000 | It took a $12 cab ride from downtown Des Moines to get to Bauer 2000 campaign headquarters. But by the time you read this, Gary Bauer's Iowa offices will probably be deserted, its computers, staffers and fax machines broken up and possibly redistributed among more viable Republican candidates, like, oh, Alan Keyes. But when I arrived three days before the Iowa Caucuses, the offices of the former Reagan domestic policy advisor and future presidential-election footnote were humming. Softly. I was the only new volunteer who walked through the door that day, and the campaign staffers didn't quite know what to do with me. They didn't seem all that accustomed to finding work for volunteers, and only after 10 or 15 minutes of asking around was Andy, the young Bauer staffer I was handed over to, able to find something for me to do. If cleanliness is next to Godliness, then the Bauer campaign isn't exactly crowding the Lord. The place was a mess, with paper strewn all over the floor, posters and flyers falling off tables and empty cans of diet soft drinks on every surface. Andy, looking every inch the capable campaigner in blue suspenders and a tie, showed me a cubicle, handed me a list of phone numbers and gave me a script. I was supposed to call everyone on the list and ask if they were going to their caucus on Monday night. If they were, I was supposed to ask them if they were going to support Bauer. If they were not supporting Gary, I was supposed to talk them into supporting Gary. Pretending you feel fine when you've got the flu is exhausting -- and I had the flu in a big way. On my flight to Minneapolis, I felt this itch in the back of my throat. Waiting for my flight to Des Moines, a headache kicked in. On the plane, I started to sneeze. In the cab to the hotel, I started to cough. By the time I got to my room, I had the flu. I got undressed, crawled under the covers and stayed in bed for the next two days. By all rights, I should be back in my hotel room laying in bed, where I spent the last 48 hours. I don't want the Bauer people to realize how sick I am, so I'm relieved that they've stuck me in an out-of-the-way cubicle, where unobserved I can allow myself to look as miserable as I feel. On day three, still sick as a dog, I decided I had to get out of bed and do my job. I had planned on following one of the loopy conservative Christian candidates around -- Bauer or Keyes -- and writing something insightful and humanizing about the candidate, his campaign and his supporters. Then, from my deathbed, I caught Gary Bauer on MSNBC. "Our society will be destroyed if we say it's OK for a man to marry a man or a woman to marry a woman," Bauer said. Seeing Bauer go off about gay marriage reminded me of something he said back in December when the Vermont Supreme Court came out for same-sex marriage. "I think what the Vermont Supreme Court did last week was in some ways worse than terrorism," Bauer told the Associated Press. Next page | If it's terrorism Bauer wants ... FYI: As posted at... http://www.salon.com/politics2000/feature/2000/01/25/bauer/index1.html Stalking Gary Bauer | page 2 In my Sudafed-induced delirium I decided that if it's terrorism Bauer wants, then it's terrorism Bauer is going get -- and I'm just the man to terrorize him. Naked, feverish and higher than a kite on codeine aspirin, I called the Bauer campaign and volunteered. My plan? Get close enough to Bauer to give him the flu, which, if I am successful, will lay him flat just before the New Hampshire primary. I would go to Bauer's campaign office and cough on everything -- phones and pens, staplers and staffers. I even hatched a plan to infect the candidate himself. I would keep the pen in my mouth until Bauer dropped by his offices to rally the troops. And when he did, I would approach him and ask for his autograph, handing him the pen from my flu-virus incubating mouth...

FYI: As posted at... http://www.drudgereport.com/sal.htm XXXXX DRUDGE REPORT XXXXX WED NOV 29, 2000 18:02:31 ET XXXXX PENNY STOCK? SALON.COM CLOSES AT ALL-TIME LOW; RISKS DE-LIST! The Internet's SALON.COM was rocked on Wednesday after the webmag's stock plunged to its all-time low value -- closing at a critical $1 a share! If SALON.COM slips another inch, it risks the humiliation of getting delisted from the NASDAQ stock exchange. Just last year, SALON went public, offering 2.5 million shares at between $10.50 and $13.50 per share. But it now appears the marketplace has spoken -- and the marketplace has rejected the sassy website that once blazed trails and tipped the scales. SALON editors and staffers have watched in shock as their company has lost nearly 20% in value this week alone... FYI: As posted at... http://www.inside.com/jcs/Story?article_id=34503&pod_id=7 Ambitious 24-Year-Old Pushes Plan to Buy Salon and Turn It Into a Clearinghouse for Other Publications When your stock price hits 13 cents, you'd be surprised who comes out of the woodwork with big plans. Bhu Srinivasan, ex-CEO of ThinkView and a veteran of Infospace, wants to slash the staff and substitute high-brow syndicated material. by Greg Lindsay Wednesday, July 11 06:02 P.M. Facing a cash crunch, probable Nasdaq delisting and a stock price which values the entire company at under $2 million, Salon Media Group, Inc. -- the renamed parent of Salon.com -- would appear to have all the ingredients needed for a takeover attempt done on the fly. As it happens, one arrived last week from doppelganger corporation Salon Holdings LLC -- a one-man shell company that would buy Salon... FYI: As posted at... http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=22592 Salon.com now sells porn / Offers 'premium-only galleries of erotic art and photography' for a price By Julie Foster © 2001 WorldNetDaily.com Succumbing to the pressures associated with online business – namely lack of revenue sources – Salon.com has begun selling pornographic material on its news and commentary website, hoping the subscriptions will heal the financially ailing Internet publication. For $30 per year, customers will get a new commentary section featuring the "exploits and mishaps of President George W. Bush and his administration," additional commentary, synopses of reality television shows like "Chains of Love," audio downloads of celebrity-read stories -- and "premium-only galleries of erotic art and photography in Salon Sex."...

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