Less than a year after media magnate Rupert Murdoch received a shaving cream pie smackdown while testifying at a parliamentary hearing on the phone-hacking scandal that has plagued News Corp. (NWS), he and his son James are getting grilled again.
Murdoch the senior slipped into the hot seat Wednesday following the son's Tuesday testimony before London's Leveson inquiry, which is heading a months-long investigation into the ethics of the British press, particularly its relationship with political figures.
Rupert was on the defensive during his first day of testimony (he returns to the stand tomorrow), poo-pooing speculation that he has used his enormous influence for News Corp's own gain. The questioning spanned decades, touching on everything from whether he discussed News Corp's potential British Sky Broadcasting (BSY.L) deal with British Prime Minister David Cameron to whether he attempted to woo Margaret Thatcher to smooth his bid for the Times newspapers back in 1981.
"I never asked a prime minister for anything," he stated.
James Murdoch on Tuesday held to his position that he had no idea of the widespread "cancer" of the phone hacking of potentially hundreds of people -- from celebrities to crime victims -- that occurred at British tabloid News of the World while he was head of News International. The tabloid was forced to shut down last year as the scandal escalated. James stepped down from his role as chairman of News International in March.
James also downplayed the nature of his communications with British PM David Cameron and Culture Secretary of State (and Olympics czar) Jeremy Hunt during the time News Corp. was seeking to purchase BSkyB, of which they currently own 39%. News Corp. last year abruptly dropped the bid to change that stake to 100% amid the hacking controversy. James exited his chairman role with BSkyB earlier this month, further retreating from his public role at News Corp. to concentrate on operational duties for the company's TV business.
Suspicion surrounding the email contact between Hunt and News Corp. during a time when Hunt should have had an impartial role in relation to the deal has led to some speculation that the culture secretary may have to exit his post as well. On Wednesday his advisor, Adam Smith, stepped down, stating, "I appreciate that my activities at times went too far." And the controversy goes on...and on...and on...
This seems like a good time to revisit our early March post on the News Corp. stock's "pie low," and take a look at where shares stand today.
Since March 4, when Yahoo! Finance reported on the stock's upward movement following the pie-in-the face incident on July 19, NWS has traded in a range of $18.92 to $20.49, still well above the "pie low" (to give credit where credit is due, Jim Cramer coined this phrase on CNBC) of $15.40. The grilling didn't hit the stock on Tuesday or Wednesday; early Wednesday it was trading up close to 1%.
Long-term investors may be looking at whether News Corp. could someday make another bid for BSkyB. After all, when the deal was scuttled, it left a bit of cash on the table for the company (last July it announced a stock buy-back of $5 billion). But, again, it's long-term investors that might post this question -- this isn't something that is likely to happen in the near future. Chief Operating Officer Chase Carey said at an investor conference in February that another buyback could be possible and that News Corp. may look to purchase smaller companies while also focusing on "organic growth." Meanwhile, he said, Fox's TV network should see a $1 billion operating profit for the 2013 fiscal year.
And, as we said in March, investors may be focusing on the strength of the company's operations as a whole rather than the neverending scandals, which some say may be more politically driven than anything else.
What do you think? Does the scandal matter to you? Do you think the Murdochs really knew about the hacking practices employed by News of the World? Do you think the relationship between the Murdochs and Jeremy Hunt was inappropriate, and will Hunt be forced to step down?