There are growing expectations that several UK media companies are weighing up whether to issue tracker stocks which would offer investors separately quoted shares grouping together a company's Internet assets. Though several US companies have issued tracker stocks or plan to do so, the practice has yet to occur in Britain.
Investors pushed Pearson to an all-time high of 1847p, up 57p, after the media group's newspaper, the Financial Times, published a news feature on tracker stocks entitled: "A way of getting greater freedom from a staid parent." Last week, Pearson revealed it was considering issuing a tracking stock for its on-line interests.
Among other media stocks, Daily Mail and General Trust (DMGT), publisher of the eponymous daily newspaper and an early mover into web sites, fell 2.2 per cent to pounds 44.16, but remained near the all-time highs recorded with the stock's ascent in recent weeks. Other major gainers include smaller media companies with growing Internet interests such as EMAP, the magazine publisher that also has nearly 100 web sites, and Informa, the business- to-business publishing group, whose titles include Lloyds List. EMAP lost 3 per cent to 1321p after recent strong gains, while Informa hit a new all-time high of 636.5p, up 15p. WPP, the advertising group that leads in global on-line advertising revenue, added 13p to close at 918p and Reuters, the financial information and transactions provider, also rose 32p to 808p, nearing all-time highs.
"In the media sector, the market is already attempting to pick its winners and losers," according to a report from Salomon Smith Barney's media research team. "The group has polarised between the premium-rated `haves' and the discount-rated `have nots'. Looking forward we believe that corporate activity will remain high, with normal consolidation trends being augmented by the US model of joint ventures and alliances." So far, the UK has yet to see merger and acquisition activity driven purely by strategic Internet considerations. But this may change this week, should Telewest strike a deal with Flextech to vertically integrate its cable network with the latter's interactive assets and dominant position in basic tier thematic pay-TV channels.
What the mooted Telewest-Flextech deal shows is that the value of content is rising rapidly. In this respect, the ratings of media companies, since they are mostly about content, could be on more solid ground in the event of an Internet sector sell-off. Perhaps the most interesting illustration of content being valuable concerns Pearson, which has operations in France, as well as a 32 per cent stake in CBS MarketWatch. That content saw Marjorie Scardino, the Pearson chief executive, appointed to the board of America On-Line in September.