The gathering scale of the crisis surrounding Rupert Murdoch's media empire alarmed investors and sent News Corporation shares plunging yesterday, as the media mogul prepped for a Parliamentary select committee grilling that could determine his future at the helm of the company.
Whereas last week, Wall Street had largely dismissed the financial implications of the hacking scandal at News Corp's British newspapers, the resignations of two senior executives and a weekend of further dramatic headlines prompted a rethink and the company's shares were down more than 5 per cent in early trading in New York.
They had fallen as much as 7 per cent earlier, when trading began in Australia. And the falls could have been even greater were it not for talk that the crisis would weaken the Murdochs' grip on the company and push News Corp into some shareholder-friendly reforms.
"There are the potential monetary aspects and the potential management aspects," said James Dix, an analyst at Wedbush, explaining the share price reaction. It is clear that the scandal is now going to consume the time of both Mr Murdoch and his son, James, the deputy chief operating officer, and the answers the two men give to the Parliamentary committee today will decide if they can get the issue under control.
"What shareholders are concerned about is what was done by management and when, based on what they knew. Were their inquiries reasonably done, and were they diligent in following up what they learnt? If their answers are reasonable, then that would answer shareholder concerns," Mr Dix said.
The hacking scandal was slow to break on to the news in the US, but when it did last week, it quickly became a hot political issue.
Democrat politicians have already threatened Congressional hearings into News Corp's actions, and particularly into an allegation in the Daily Mirror that News of the World journalists tried to hack the phones of victims of the 9/11 attacks.Reuse content