The new decade has started on a rotten note for the ageing Caribbean surf legend Rupert Murdoch (spotted last week cavorting in the shallows with wife Jerry Hall) and his faltering News Corp empire.
Murdoch’s Australian newspapers have been slammed for their biased and troubled reporting of the bushfire crisis — even his own son has joined the criticism — leading this week to a $5 million donation to various appeals in a sort of guilt payment. This is on top of the collective $4 million from the family and its various branches.
While James and Kathryn Murdoch’s comments are getting plenty of attention, there are more pressing business matters that remain undiscussed.
There's more to Crikey than you think.
Get more and save 50%.
One such matter is the quiet move by the company’s biggest Australian investor, Sydney fund manager Perpetual, to sell all but a handful of its voting shares in News.
A filing with the US Securities and Exchange Commission on Monday revealed that Perpetual had been selling millions of shares in News in the past year.
Back in 2016, Perpetual was the largest non-Murdoch shareholder in News. It held 12%, or 23.95 million class B voting shares. This stake had been carried over and built on in the split in the empire back in June 2013 — when the TV and film assets went into Fox, and the papers, real estate and Foxtel holdings went into News.
Perpetual held the stake steady but started selling in 2017, cutting it to 11.3% by the end of that year, 8.6% at the end of 2018 and finally, just 1.41% at the end of 2019 — or 2.81 million voting shares.
Now News has very few Australian investors in its share register and it would not be a surprise if the limited listing of the shares on the ASX is ended as a cost-saving measure.
It was a dud investment for Perpetual — there were few if any capital gains since the listing of the News Corp shares at the end of June 2013. The shares hit a peak on Wall Street of US$18.11 in October 2013 (four months after the split), fell, and then rose again to the most recent high of US$17.50 in January 2018. They then fell again, closing at US$15.02 on Tuesday.
In fact, News Corp shares have grossly underperformed in the wider US market and have been a dud investment — even for the Murdochs and their families.
In contrast to the fall since mid-2013, the key US indicator, the S&P 500 has almost doubled in the same time — from 1693 to 3278. The Murdochs would have been considerably richer if they had sold the empire and invested the cash in index tracking funds.
Instead they have held onto a collection of weak and poorly performing assets (with the exception of Fox News in the US) and gone backwards — but not before leaving a terrible stain on Australia, the UK and US from the biased reporting in its newspapers and pay TV businesses.
And then there’s yet another dud tech investment (remember the MySpace debacle?).
Early in the new year, the Murdoch empire quietly buried Unruly, a UK-based video content and advertising marketplace business for zilch. In fact News is paying the buyer, Tremor, to buy the business by financing the integration and restructuring into the new owner’s businesses.
News paid £115 million (US$176 million at the time) in September 2015 for Unruly. Now, not only is News paying Tremor to bury the floundering business, it will take up 6.91% of Tremor’s shares (worth around US$17 million on January 6). The new Unruly-Tremor partnership has also undertaken to spend £30 million over three years on News’ newspaper websites around the world. But, even in these days of falling revenues, £10 million a year across the papers in the US, UK and Australia is piddling.
This doesn’t reflect well on News Corp CEO Robert Thomson. In the 2015 statement announcing the Unruly purchase he said confidently:
The acquisition will serve as a catalyst for our brands, helping to extend our expertise in the digital and mobile video area … Unruly complements our traditional editorial and commercial expertise with contemporary insight into how people read, watch, buy and sell in the digital era.