In the six months since the revelation that the News of the World accessed a murdered teenager’s voicemail messages, the scandal has cost Rupert Murdoch the British tabloid he bought in 1969 his
bid for full control of
British Sky Broadcasting, some of his
closest executives and, perhaps, his dream of family succession.
Yet, in Wall Street’s eyes, it is as though nothing happened. This week, shares in
News Corp hit a 52-week high, edging past the peak at which they stood before the
Milly Dowler report upended Britain’s media, police and political establishment.
Over six-month and 12-month periods, the stock has beaten rivals including
Walt Disney,
Time Warner and
Viacom, and, of 25 analysts following News Corp, 17 rate the stock a “buy” and the other eight a “hold”, according to Bloomberg.
“It’s a very straightforward stock right now,” says Michael Nathanson, media analyst with Nomura. Of the
hacking scandal, he says: “The Street is looking through it. There are legal costs, potential payments and obviously a huge controversy, but it’s seen as a one-off.”
Analysts cite four reasons why the scandal has not had a bigger impact on the stock: generous share buy-backs, hopes that newspapers will become a smaller part of the group’s future, robust growth in the rest of the business and faith in the non-family member first in line to succeed Mr Murdoch,
Chase Carey.
Just days after the Milly Dowler story broke, News Corp added $3.2bn to its
buy-back programme, lifting the target for repurchases to $5bn. Investors had pressed Mr Murdoch for several years to spend more on buy-backs, fearing that News Corp’s plentiful cash would otherwise be spent on unexpected deals such as MySpace and Dow Jones, some of which led to heavy losses.
Acquisitions remain a possibility, as News Corp has been eyeing deals in areas as diverse as
Formula 1 motor racing and
education. But much of the stock’s rally can be explained by the fact that News Corp has now spent $2.5bn buying back 151.07m class A shares between $14.73 and $18.39, just below $18.49 Thursday close.
Analysts are already hoping for more. Morgan Stanley expects another $5.5bn of repurchases in 2012, equivalent to 11 per cent of the current market capitalisation, and Mr Nathanson says: “They’re not going to let cash build up on the balance sheet. They’re half way through the buy-back, and everyone’s going to wait and see if there’s a phase two.”
Investors had welcomed News Corp’s bid for the 60.9 per cent of BSkyB it does not already own, as the group has been unable to reflect the UK satellite broadcaster’s prodigious cash flow fully in its accounts, but saw buy-backs as even better use of cash.
