The Murdoch clan’s property business, REA Group, is staring at a 25% slide in its share price since its all-time high in late July as investors wake up to the fact that the property boom in Sydney and Melbourne is built on shifting sands.
REA Group shares have fallen from an all-time high of $65.77 on July 29 to yesterday’s close of $49.80, a fall of 24.2%. And that in turn has forced the local News Corp share price down by 17.6% to $16.17 yesterday, from $19.63 in early October. The price of News’ US listed shares (a better guide because the currency factor is softening the size of the fall in Australian dollars) has fallen more than 19% from the most recent high of US$15.17 in early October to US$12.23.
The fall has cut the value of News Corp by around US$1.4 billion in just on six weeks. The value of the shares have also been hit by the weak first-quarter figures, where the company reported a small loss, and also revealed cost cuts at The Wall Street Journal (US$100 million) and at News Corp Australia, another $40 million.
As REA shares sink, so do News Corp shares, and the size of the Murdoch family fortune. At the close yesterday on the ASX, News was valued at $9.2 billion, and REA at $6.56 billion. That 61% stake was worth just on $4 billion alone of News Corp’s total value, but the entire figure for REA should be included as News Corp has effective control.
Just on the basis of the $4 billion value, the rest of News Corp — all the papers in Australia, the US and around the world, News’s information services, 50% of Foxtel, 100% of Fox Sports, 100% of Move and associated property businesses in the US, Harper Collins publishers — is valued at just over $5 billion. That’s less than the US$6.2 billion in goodwill and other intangibles in the balance sheet at September 30. On that basis, the US$1.5 billion in cash is free and has no value, REA Group owns 20% of Move, which further adds to the pressures at the moment from the tanking property market. No matter how well move does, so long as investors thik the Australian property market is in trouble, or under pressure, the REA share price will drive the share price of News Corp and part of the Murdoch family fortune. — Glenn Dyer
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