Scandal-hit News Corp loses $7bn in market value in four days

The media empire currently under fire is 7% owned by Saudi Arabia’s Prince Alwaleed Bin Talal
Prince Alwaleed greets News Corps Rupert Murdock at an Abu Dhabi media conference
By Shane McGinley
Tue 12 Jul 2011 03:04 PM

Rupert Murdoch’s News Corporation, which Saudi billionaire Prince Alwaleed bin Talal, owns a seven percent stake in, has lost $7bn in market value over four trading days, amidst investor concerns a probe into alleged phone hacking by journalists at the New of the World newspaper could have a broader impact on the company.

Rupert Murdoch’s New York-based media company tumbled 4.6 percent to A$15.19 in Sydney on Tuesday. The stock lost $1.27, or 7.6 percent, to $15.48 in Nasdaq Stock Market trading on Monday, the biggest drop since April 2009. It was the fourth straight decline in the company’s closing price, cutting its market value by 15 percent to $41.2bn.

The slide is far out of proportion with the lost profits from closing the News of the World tabloid or from delaying the acquisition of the satellite-TV provider British Sky Broadcasting Group, said David Bank, an analyst at RBC Capital Markets in New York. Investors are concerned about the scandal’s effect on other News Corp holdings, which include the Fox TV networks and film studios, the Wall Street Journal and three other newspapers in the UK.

The under fire media conglomerate is seven percent owned by Saudi billionaire Prince Alwaleed bin Talal’s Kingdom Holding, which saw the value of its stake slump by nearly $500m as a result of the shares drop.

Earlier this week, Prince Alwaleed, whose company is the second biggest shareholder in News Corp, said there would be no change in his investment in News Corp.

"No change, my investment is strategic, not thinking of selling anything," he told Reuters by telephone. "The crisis does not make Kingdom Holding blink at all. It makes our partnership stronger."

Prince Alwaleed said he was in contact with News Corp from the onset of the crisis and that he supported the decision to close Britain's News of the World tabloid engulfed in the scandal.

"Since the crisis erupted I have been in touch with them to contain this problem," he said. "Their decision to shut down this tabloid in England is supported by me because we have to put this issue behind us."

The most immediate questions involve News Corp’s $12.4 billion bid for BSkyB. On Monday, UK Culture Secretary Jeremy Hunt said he will refer the proposed deal to the country’s Competition Commission, which will spend at least six months on a review.

"What happened in the scandal is a deviation from what News Corp wants now which is full control of the remaining shares (of BSkyB)," Prince Alwaleed said on Sunday.

UK Deputy Prime Minister Nick Clegg on Monday asked Murdoch to “reconsider” the BSkyB offer following allegations that News of the World tabloid hacked into voice mails of terror and murder victims and paid police for stories.

News Corp, which already owns 39 percent of BSkyB, wants full control to gain access to the broadcaster’s increasing cash flow. BSkyB may also help Murdoch make News Corp.’s newspapers more profitable by allowing him to bundle print and pay-TV subscriptions and spread content over media platforms.

In Australia, where Murdoch began building his media empire in the 1950s, Greens party leader Bob Brown called for an inquiry into media intrusion and said a public watchdog should be established following the closure of the News of the World.

(*With Reuters and Bloomberg)

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