March 20, 2023

DealBook: News Corp. Shares Leap on Potential Split

Shares in News Corporation rose more than 6 percent in morning trading on Tuesday, on reports of a potential plan to split the media empire in two.

Under the terms of the proposed split, the company would spin off its publishing business from its much larger entertainment unit, according to a person briefed on the matter. That would create two corporate entities: an entertainment giant, driven by a movie studio and powerful television networks, and a much smaller publishing unit containing Dow Jones and HarperCollins.

The move would be intended to appease shareholders unhappy with the general tepidness of News Corporation’s stock performance, which has not kept pace with the likes of the Walt Disney Company. While the company’s shares have risen more than 17 percent this year, that increase has been supported in part by an extensive and expensive stock buyback initiative. On Tuesday, News Corporation’s stock hit $21.50 shortly after the opening bell, its highest level since late 2007.

The potential split comes even as a phone-hacking investigation continues to cloud News Corporation’s newspaper business in Britain.

The plan has the support of several News Corporation executives, notably the chief operating officer, Chase Carey, this person said. Mr. Carey said earlier this year that management had considered a split, though at the time he added that nothing had been decided.

The proposal has not been finalized. And while News Corporation’s patriarch, Rupert Murdoch, has softened his longstanding opposition to the plan, he has not signed off on it, the person said.

A number of factors remain to be resolved, including which operations would go into which entity, and — perhaps more important — which executives would head which businesses.

Still, an announcement about the corporate breakup could come as soon as this week, this person said.

“News Corporation confirmed today that it is considering a restructuring to separate its business into two distinct publicly traded companies,” the company said in a statement on Tuesday.

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Shares Skittish on Greece Fears

At the close, the Standard Poor’s 500-stock index was up 2.25 percent, after spending much of the day in bear market territory, defined as a 20 percent drop from the previous peak. The S. P. 500, considered a broad measure of stock performance, last peaked in April.

The Dow Jones industrial average closed with an increase of 1.44 percent, and the Nasdaq composite index gained 2.95 percent.

Analysts differed on the significance of a bear market label. Some believed that it could serve as a psychological blow that could fuel a further sell-off. But others said it was little more than another day in five months of trouble on Wall Street.

“Today will not be the driving force,” said Richard J. Peterson of Standard Poor’s Capital IQ.

Federal Reserve Chairman Ben S. Bernanke voiced his own concern about the American economy when he addressed a Congressional committee Tuesday morning. Mr. Bernanke called on Congress to take action on jobs, but also said that the Fed was prepared to take further moves to stimulate the economy. He said the turmoil in the markets was acting as a drag on the American economy.

The market’s downslide eased during Mr. Bernanke’s appearance, then slipped in late afternoon before its move into positive territory right before the close of trading. Analysts noted the negative tone of his remarks.

“We’re no longer comparing it to what you would be expecting in a recovery — it’s that we’re not as bad as we were in 2008. He talks about the limits of what he can do,” said Eric Green, chief economist at TD Securities.

In economic data, new factory orders were down slightly in August, but not as bad as most analysts had predicted, according to figures from the Commerce Department. Andrew Wilkinson, chief economic strategist for Miller Tabak Co., said that the numbers were the latest in a series of economic indicators showing that the American economy was not slipping into recession. Still, he said, the economy remained vulnerable.

“It’s moving in the right direction, but it’s moving at a very slow pace,” he said.

Earlier in Europe, stocks declined sharply. In London, the FTSE 100 index closed down 2.6 percent, the DAX in Frankfurt was 3 percent lower and the CAC 40 in Paris was down 2.6 percent.

Finance ministers from the 17 European Union nations that use the euro postponed moves to release the next installment of aid to Greece, which means that Greece is now unlikely to receive 8 billion euros ($10.6 billion) before November.

European banking shares fell sharply, led by Dexia, whose value has plunged this week because of its exposure to Greek debt.

The price that European governments pay for credit default swaps, which serve as insurance against default for their sovereign debt, rose sharply across Europe, with the largest increases coming in France and Germany, two countries that may be called to bail out weaker nations in the case of a financial crisis. European banks also had to pay more to insure their debt.

In Asia, the Nikkei 225 in Japan fell 1.1 percent, while the Hang Seng index in Hong Kong lost 3.4 percent to close at its lowest level since 2009.

American crude oil fell 2.51 percent to $75.66 a barrel. Gold prices were down 3.51 percent. Yields on 10-year U.S. Treasury bonds were up to 1.786 percent.

The dollar rose to a fresh nine-month high against the euro, which fell as low as $1.3144, a nine-month low, before recovering to $1.3293.

Since World War II, there have been 10 bear markets, according to JPMorgan Chase, with the market dropping an average of 35 percent. The most recent bear market came between October 2007 and March 2009, when the market fell by 56.8 percent.

Overall, stocks for American companies valued at more than $100 million have lose $4.03 trillion in value since the market’s peak, according to an analysis by Mr. Peterson. Worldwide, the loss has been $13.5 trillion since the end of May.

Banks have been hit particularly hard. Bank of America has lost 56 percent of its market value since April, while Citigroup has lost 51 percent.

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