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News Corp. shares soar amid market rally

August 11, 2011 | 12:30 pm

Investors for the last month have been punishing Rupert Murdoch, pushing down the value of his media company News Corp. by nearly 25% as the company has struggled to contain the damage from illegal phone interceptions by operatives of one of his London tabloids.

All that changed Thursday.  Amid a broader market rally, shares of News Corp. went on a tear, gaining 18% in value after the company's fourth-quarter earnings beat analysts' expectations.  In an earnings conference call after markets closed Wednesday, analysts seemed mollified that no new bombshells were about to come out. 

Rupert Murdoch Instead, News Corp. executives said they would raise the dividend and buy back at least $5 billion in News Corp. shares.  Shares closed Wednesday (before the conference call) at $13.71, and by midday Thursday they had climbed to $16.20.

The share price is still down about 10% from its pre-scandal trading levels. The day the British crisis exploded, July 5, News Corp. shares topped $18 a share.

On Wednesday, the 80-year-old mogul said he was not planning on stepping down from the chief executive role. However, he said that Chase Carey, the chief operating officer, and not one of his children, would step into the role immediately if Murdoch "was run under a bus."

Carey also calmed investors by saying  the company was not planning to go on a spending spree.  News Corp. had built its cash reserves to more than $13 billion so that it could buy out the remaining shares of British Sky Broadcasting, the largest pay TV service in Britain.

Last month, News Corp. was forced to withdraw its bid, valued at $12 billion, amid the fall-out of the News of the World phone hacking scandal and criticisms by members of the British Parliament that Murdoch already had too much media power.

"We plan to use this cash to continue to pursue additional buybacks beyond the $5 billion one recently announced if our stock continues to be undervalued, and today it is woefully undervalued," Carey said.

-- Meg James

Related:

Murdoch says he's staying at News Corp. helm

News Corp.'s Rupert Murdoch Gets Mixed Reviews

News Corp. shares hammered in wake of phone hacking scandal

 Photo: Rupert Murdoch. Credit: Louis Lanzano / Associated Press

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