New News Corp Stock Drops, 21st Century Fox Rises in Australian Pre-Split Debut

6:02 AM PST 06/19/2013 by Pip Bulbeck

The split of Rupert Murdoch’s media empire into the publishing firm and an entertainment company will close on June 28, but the stocks are getting a trial run.

SYDNEY – The new News Corp, the publishing company that will be created by the split of Rupert Murdoch's media empire into two entities, dropped 3 percent in its debut on the Australian Stock Exchange Wednesday as so-called when-issued trading of its stock kicked off.

But the stock of entertainment company 21st Century Fox rose 5.1 percent.

The separate stocks of the new publishing and entertainment companies will formally start trading on the stock markets in the U.S. and Australia on July 1. But, as is typically the case with stock splits, the future stocks are getting a trial run starting Wednesday. The Australian version of when-issued trading commenced Wednesday "on a conditional and deferred settlement basis," according to the company. Unconditional trading starts July 1.

The Australian version of when-issued trading commenced Wednesday "on a conditional and deferred settlement basis," according to the company. Unconditional trading starts Jul 1.

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New News Corp shares in Australia opened at AUS$15.00 ($13.61), but closed down three percent at AUS$14.55 ($13.21). That signaled a market value for the publishing business of $7.9 billion (AUS$8.3 billion).

The stock of the entertainment business closed at $28.98 (AUS$30.50), giving 21st Century Fox a market value of more than $66.5 billion (AUS$70 billion). The Financial Times said that adjusting for the split, the combined value was up from Tuesday's closing price for the conglomerate.

Most analysts expect the separated newspaper stock to face challenges early on, with many projecting an earnings decline in its first two years of stand-alone operation. They also expect the entertainment stock to rise. Australian analysts said they weren’t too concerned by Wednesday's moves.

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According to Murdoch’s local broadsheet, The Australian, most analysts predicted a share price of less than AUS$20 for New News Corp, with one valuing the stock at AUS$18.89 ($17.95) and 21st Century Fox at AUS$27.17 ($25.81).

Shareholders get one share in the publishing side of the business for every four held in the current firm.

Meanwhile, U.S. analyst Richard Greenfield from BTIG on Wednesday downgraded his stock rating for News Corp. to "neutral" from "buy" ahead of the split.

"News Corp. shares have rebounded from fears tied to the phone-hacking scandal as management regained investor trust/confidence by ramping capital return and simplifying the corporate structure over the past two years," he said. "We are downgrading the combined company’s shares...with News Corp. shares having closed last night above our prior price target of $30."

Georg Szalai in London contributed to this report. 

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