Monday, August 15 2011
Newscorp closed up 17% last night and has now recovered what it lost during the phone hacking scandal. This is quite a surprise given the slowdown that has occurred in the US would be impacting their earnings. However it appears that Rupert has closely followed the amount of short sellers on his register and extracted some revenge (he is not known as the forgiving type).
Specifically at his result presentation he announced:
1. Profit guidance of low double digit growth (albeit he has little visibility around earnings).
2. That he would aggressively buy-back his shares.
3. And that a future CEO would be Chase Carey not his son James.
This triggered short covering in an astonishing rally. It also highlights how short the market is in some of these stocks and possibly presents a lesson to other Boards worried about the shorts on their register. Note this tactic only works if you have a strong balance sheet and sound business.
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