We were right. S&P has announced that News Corp will be
kicked off Australia’s benchmark institutional index, the S&P/ASX
200, if it goes ahead with its move to the US.
We look forward to Andrew Butcher’s email congratulating us on our very
accurate scoop yesterday morning that News Corp’s move to America would
see it booted out of all ASX indices. You can read the announcement
The key paragraphs are as follows:
“If News Corp Ltd elected to change its domicile form Australia to the United States:
- It would likely become eligible for possible inclusion in the S&P 500 index.
- If it is subsequently included in the S&P 500 it will become
ineligible for inclusion in the S&P/ASX 50. It will also become
ineligible for inclusion in Australia’s benchmark institutional index
the S&P/ASX 200 and the whole suite of S&P/ASX indices
recognising that the S&P/ASX 50 is a subset of theses indices and
that News Corp Ltd’s current market capitalisation would give it a
disproportionately large weighting within other S&P/ASX indices.”
CRIKEY: We are now predicting that Australian institutions are quite likely to vote the deal down later this year.
This is how we broke the news to Crikey subscribers:
Is News Corp to be booted out of ASX 200?
June 22 sealed section
This one only came in late on Monday night and has prompted this
short first edition. We’ve been given the tip by a usually reliable
source that News Corporation is to be booted out of the ASX 200 if the
move to America is approved by shareholders later this year.
The ASX is apparently making the announcement in Sydney later this
morning. If true, this would increase the likelihood that the deal will
be voted down.
However, if the deal was approved by shareholders, it would cause a
flood of selling by Australian institutions such as Perpetual, QIC, IAG
and AMP who have to hug the index.
News Corp makes up about 7 per cent of the index and its departure
would see licensed banks and insurance companies move to more than 40
per cent of the ASX 200 – an unprecedented situation anywhere in the
We haven’t checked the tip and it could be wrong but our hunch is that
this will be the business story of the day and Rupert won’t be at all
As we flagged yesterday, there is plenty of action on the News
Corp index front with ASX heavies fighting with the global index gurus
from Standard & Poor’s over whether Rupert Murdoch’s company should
be booted out of the ASX 200 if the move to America proceeds.
When the ASX floated on itself and become a massively conflicted
regulator in 1998, it called in S&P and gave it a majority of three
representatives on a five person index panel. S&P global guru David
Blitzer flew in to Sydney yesterday for a meeting which was meant to be
confirm that News Corp would be thrown out of the ASX 200 if it moved
its domicile to the American state of Delaware.
But the ASX is worried about the loss of revenue as any conflicted
profit-driven exchange would be. Local fund managers are also concerned
because they own more than $10 billion worth of News Corp shares.
They are fighting a rearguard action against S&P which smacks of
hypocrisy. If no other company is allowed to be in the S&P500 on
Wall Street and another major index elsewhere, why should News Corp
receive special treatment?
The other problem with the move to America is that only one of the
two classes of News Corp shares can join the S&P500 and this will
be the non-voting preferred shares which now comprise almost 70 per
cent of News Corp’s shares on issue.
However, the Australian shareholders are more concentrated in the
voting shares because Rupert has issued almost 3 billion new non-voting
shares over the past decade to foreign companies in exchange for media
assets such as Chris-Craft and Hughes Electronics.
These foreigners will love having the non-voting shares in the
S&P500 but that will not be in the interest of Australian
institutions. The stakes are very high as Crikey believes a firm
decision to boot News Corp from the ASX 200 if the deal is approved
would see many Australian institutions vote against it.
This is partly why Rupert has just spent tens of thousands of
dollars flying executives from big investors such as Perpetual, QIC and
IAG around the world to look at the operations and no doubt twist a few
arms on the domicile vote.
Crikey alerted the market to the index D-Day yesterday morning and
News Corp shares fell 1 per cent in response, although the ordinaries
bounced 12c to $13.23 today and the preferred shares gained 6c to
Does today’s recovery suggest the ASX, News Corp and local fund manager might be beating S&P into submission?
It will be very interesting to see how the News Ltd papers handle this story. The Australian’s Jane Schulze had a straight report this morning but it was well short of the detail and controversy picked up by the Fin Review.