Federal and state authorities are investigating suspicious options trading in Dow Jones & Co. stock prior to an announcement last week of News Corp.'s $5 billion bid for the financial news publisher.
News last Tuesday of the $60-per-share bid by Rupert Murdoch's company sent Dow Jones shares soaring. A spokesman for Dow Jones, which publishes The Wall Street Journal, said Monday that it has received a subpoena from the New York attorney general's office and a request for information from the Securities and Exchange Commission regarding options trading.
News Corp. didn't immediately return a telephone call seeking comment Monday. A company spokesman told the Journal late last week that News Corp. had received a subpoena from Cuomo's office and an inquiry from the SEC.
From The Economist:
Which raises the $5 billion question: why does Mr Murdoch want Dow Jones? There are two main schools of thought, neither of which suggests that his offer should be viewed as sending a message about the valuations of other newspaper publishers, though their shares mostly jumped at the news of his bid for Dow.
The first school sees the bid as the latest evidence that Mr Murdoch is one of the few old-media bosses who “gets” new media. Forget the print edition of the Wall Street Journal and focus on its lucrative online edition. Content is king, and the key to success is supplying it through lots of channels, old and new. Look at how News Corp uses websites to generate additional income for its “American Idol” television show. Mr Murdoch is launching a business-television channel in the autumn. All that Dow Jones content would fit right in.
Yet the new business channel is a risky launch that has generated little enthusiasm within News Corp, where it is seen by some top executives as Mr Murdoch's vanity project. He has apparently spotted a lucrative niche for a pro-business channel, much as his Fox News channel found plenty of viewers who prefer its “fair and balanced” coverage of politics to the bleeding liberal hearts of CNN. But CNBC, America's incumbent business channel, is hardly anti-business, and it is far more in tune with what viewers want (namely, accurate information about the things affecting their investments) than CNN was when Mr Murdoch launched Fox.
Moreover, Dow Jones has a contract to supply content to CNBC until 2012, by which time the fate of Mr Murdoch's rival channel will surely have been decided.
That is why the second school tends to dismiss the new-media arguments being offered by News Corp to justify buying Dow Jones as a sop to shareholders who feel that Mr Murdoch's company is over-reliant on newspapers, some of which are underperforming. He finally managed to get rid of one of the most truculent of those shareholders last month by acquiring the stake held by Liberty Media, a conglomerate run by his old friend, turned thorn-in-the-side, John Malone. That freed him to pursue his old dream of owning a global business newspaper.
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