News Corp's loss of US$7 billion ($8.6 billion) in market value over four trading days shows investor concerns that a probe into phone hacking by journalists at one London newspaper could have a broader impact on the company.
Rupert Murdoch's New York-based media company tumbled 7.6 per cent in Nasdaqstockmarket trading yesterday, the biggest drop since April 2009. It was the fourth straight decline in the company's closing price - cutting its market value by 15 per cent to A$41.2 billion ($53.1 billion). In Australian trading yesterday the stock continued its downward spiral, losing 4.6 per cent.
The slide was far out of proportion with the lost profits from closing the News of the World tabloid or from delaying the acquisition of the satellite-TV provider British Sky Broadcasting Group, said David Bank, an analyst at RBC Capital Markets in New York.
Investors are concerned about the scandal's effect on other News Corp holdings, which include the Fox TV networks and film studios, the Wall Street Journal and three other newspapers in Britain.
"There's a lot of noise out there," said Bank.
"These headlines cause massive swings in sentiment and stock price, leaving a cloud of uncertainty about how deep the allegations go."
The most immediate questions involve News Corp's US$12.4 billion bid for BSkyB.
British Culture Secretary Jeremy Hunt has said he will refer the proposed deal to the country's Competition Commission, which will spend at least six months on a review. That will be followed by "intensive discussions".
