The ongoing phone hacking scandal has dealt a serious blow to investor confidence in News Corp. Now the company is trying to build that confidence back up. On Tuesday, the media conglomerate announced that it plans to buy back $5 billion in class A and B common shares in the next year. The News Corp. board approved the move.
Prior to the board’s approval, $1.8 billion remained under the company’s existing stock repurchase program. The new program will increase that figure by over $3 billion. News Corp. will not begin the program until August 15.
With its stock price falling as the company becomes more deeply embroiled in the ongoing phone hacking investigation surrounding its shuttered British tabloid News of the World, News Corp. may be aiming to show shareholders that this is a passing blip, and not a long-term decline. On Monday, News Corp. shares dropped by over 7 percent, closing at $16.10. The move might be working. The company’s stock opened at $16.54 on Tuesday morning.
James Dix, a media analyst with Wedbush, believes that the scandal-related delay of News Corp.'s proposed takeover of British Sky Broadcasting (BSkyB) may also have had something to do with this: "Now they have additional time to finance BSkyB. They have the cash to use," Dix says.
If the tide turns, the company is prepared to ditch the repurchase program. In the statement in which it announced the additional money, the company said the move “does not obligate the company to repurchase any dollar amount or number of shares of its common stock, and the program may be extended, modified, suspended, or discontinued at any time.”