Activist investor Starboard Value wants to end News Corp’s (NWSA) (NWS) dual listing structure to thwart founder Rupert Murdoch’s sizable voting power and influence over the company’s decisions, Reuters reported. The hedge fund has filed a non-binding resolution to dissolve the structure, which is due for a vote at the next annual shareholder meeting.
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As of June 30, Starboard held a 1.9% stake in News Corp, based on 7.2 million Class A shares and 8.7 million Class B shares held in the company. The Jeffrey Smith-run hedge fund has been pushing for changes at the media conglomerate for a year now. Starboard’s pursuit to dissolve the dual listing structure follows its push for splitting the Dow Jones and the real estate divisions. The activist investor contends that NWSA shares are trading at a discount and believes that separating the two divisions could generate over $7 billion in value.
Murdoch’s Mounting Problems
Interestingly, Murdoch owns only 14% of News Corp’s equity but has a 40% voting right on the publication house, thanks to its dual-class structure. Sources say that the company could attempt to block the resolution at the shareholder meeting.
The Murdoch family is also undergoing a legal battle regarding the passing of control of Rupert Murdoch’s stake to his son Lachlan Murdoch. Rupert Murdoch is the Chairman Emeritus at both News Corp and Fox Corp (FOX) (FOXA). Lachlan is the sole chair of News Corp and CEO, Executive Chair at Fox Corp.
Murdoch could urge the SEC (U.S. Securities and Exchange Commission) to scrap Starboard’s resolution from the agenda of the shareholder meeting. In the past, several companies have taken such steps and gained success at excluding certain points from the agenda if proven harmful to the company’s interest. Furthermore, companies are not bound to adhere to shareholder resolutions even if they come with large backing. Although such moves could tarnish the company’s image, it is at the board’s discretion to adopt or reject them.
Hedge Funds Offload NWSA Stock
In contrast to Starboard’s increasing interest in News Corp shares, other hedge funds seem to be on a selling spree. According to TipRanks’ Hedge Fund Trading Activity tool, NWSA has a Very Negative Hedge Fund Confidence Signal as hedge funds have decreased their NWSA holdings by 5.7 million shares in the last quarter.
Is NWSA Stock a Buy or Sell?
Impressed by News Corp’s better-than-expected Q4 print, three analysts lifted their price targets on the stock. With three unanimous Buy ratings, NWSA stock commands a Strong Buy consensus rating on TipRanks. Also, the average News Corp Class A price target of $36.67 implies 38% upside potential from current levels.
NWSA shares have gained 8.6% so far this year.
