Rupert Murdoch’s new News Corp publishing business failed to impress investors in its stock market debut, losing three per cent of its value.
The massive media empire is splitting its growing and more profitable cable TV and film assets from its traditional but struggling newspapers.
Shares in the publishing division, known as new News Corp, began trading on the Australian market on Wednesday, and closed at $14.55, 45 cents lower than its opening value of $15.
The non-voting stock took an even heavier fall, down more than eight per cent to $14.30 after starting at $15.60.
The falls were not a complete surprise to analysts and are not being viewed too negatively, with the new entity expected to face short term pain but has a more rosy longer term view.
The hived-off newspaper business is tipped to suffer a fall in earnings in its first two years of stand-alone operation as it tries to reduce costs.
In the interim, shareholders have received one new News Corp share for every four original News Corp shares they hold, highlighting the greater value of the entertainment division – which is to be renamed 21st Century Fox.
The choice for shareholders is whether to dump one, both or neither.
While the publishing division is seen as the owner of newspapers that are struggling in an online world, it is actually more complex than that, as it also owns the profitable Australian Foxtel and Fox Sports TV assets, plus education and book publishing businesses.
IG market strategist Evan Lucas said the choice between the two might come down to the publishing arm paying a higher dividend – including a $US500 million share buyback – and the Fox entertainment arm being a growth stock.
“The publishing arm is probably going to struggle a bit as people weigh up print media, how to get advertising dollars, whether to continue restructuring or look at other ways to build the business,” he told AAP.
“I don’t think it is going to be a bad place to be on a medium to longer term view … the digital media-pay TV part of it does actually look like offsetting issues that may come with the print side of it.”
Mr Murdoch will be executive chairman of new News Corp and chairman and chief executive of 21st Century Fox.
Shares for both companies will debut on Wall Street’s Nasdaq on Wednesday, US time, with the full demerger to occur on June 28.
Shares in the Fox division, still called News Corp, were also down in local trade due to the dilutive effects of the split.
News Corp shares lost $2.26, or 6.89 per cent, to $30.53, and its non-voting stock dropped $2.33, or 7.15 per cent, at $30.27.
