The storm over the scandal that has enveloped Rupert Murdoch’s News Corp is probably far from over, but in the meantime it has created a possible window of opportunity to pick up stock in the company at a substantial discount.
Since news broke that the now shuttered Murdoch-owned British tabloid News of the World admitted to hacking the phones of politicians, celebrities and a teenage murder victim, News Corp has lost more than $7 billion of market value as investors sold off the stock in fear of more bad news to come.
The stock has since stabilized, but according to The New York Times it still contains what it calls a “Murdoch Discount,” taking into account the often puzzling business decisions the mercurial 80-year old media baron makes with News Corp funds.
Thanks to this week’s sell-off, the stock is now trading at a 40% discount compared to its peers, Walt Disney and Time Warner, which is double the typical gap seen since 2002.
Just how undervalued are News Corp shares at this time. Citing a valuation from Barclays Capital, the Times reports that the cable news networks and the movie studio are worth $42 billion, which is equivalent to the company’s entire market capitalization.
That means that the remaining properties — the publishing arm which includes the now shuttered News of the World; Sky Italia satellite; and various private stakes and holdings in publicly held companies including a 39% stake in BSkyB (of which Murdoch dropped his bid to buy the remaining shares) — are in essence worth zero in market value. Yet according to Barclays Capital they are worth at least $18 million.
As long as Rupert Murdoch remains in power, News Corp shares will probably never reach their full potential. But the media feeding frenzy of the past week has widened that discount to unreasonable levels and presents investors with an opportunity to buy a piece of the empire while it is in fire-sale mode on Wall Street.
Even liberals should be able to recognize a deal when they see one, especially one that they helped create.