Newsmax Inc. (NMAX) shares plummeted 37.12% in pre-market trading on Wednesday, marking a sharp reversal from its extraordinary rally in the first two days of trading. The conservative media outlet, which recently went public, had seen its shares soar by an astonishing 2,230% since its debut, pushing its market valuation to surpass that of its rival, Fox Corp.

The initial surge was reminiscent of the meme stock craze seen in 2020 and 2021, with Newsmax's IPO priced at $10 per share before closing its second day of trading at $233. This meteoric rise gave the company a market capitalization of approximately $30 billion, despite reporting only $171 million in revenue last year. The astronomical price-to-sales ratio of around 175 far exceeded the metrics of other well-known meme stocks, raising concerns about the sustainability of Newsmax's inflated valuation.

As the initial excitement wanes, investors appear to be reassessing the company's fundamentals. Newsmax faces ongoing litigation related to its 2020 election coverage, which could potentially impact its bottom line. The company is currently facing a lawsuit from Dominion Voting Systems seeking $1.6 billion in damages. Additionally, the broader market sentiment around volatile IPOs and meme stocks may be contributing to the pullback. As reality sets in, it seems that traders are taking profits and reconsidering the long-term prospects of the media company, leading to this significant correction in the stock's price.