Not mentioned in the Gotham Schools story is that yesterday was the debut of the "new" News Corporation, with Joel Klein at the helm of the for-profit education technology division that is now paired with the newspapers and the publishing house, Harper Collins.
The much more profitable entertainment business in the old News Corporation has been spun off into a company known as 21st Century Fox.
Here is how Reuters reported on that story:
(Reuters) - Wall Street rewarded Rupert Murdoch's move to create a separate entertainment company, giving 21st Century Fox one of the richest valuations in the media sector on its first day of trading.
Investors had waited for Murdoch to split News Corp, giving its cable, movie and equity stakes in pay-TV assets their own spotlight away from the publishing division.
The move is part of larger trend among media companies that are shedding print properties. Tribune announced on Monday it will acquire a stable of TV stations making it one of the largest local TV broadcasters while it seeks a possible sale of its newspapers.
21st Century Fox, which includes the Fox cable network, already has one of the highest valuations among its media peers based on 2013 price to earnings multiple. At 20.7 times, it is higher than Walt Disney, Viacom and Time Warner, and ranks second only to Discovery according to estimates from UBS analyst John Janedis.
Shares in the new 21st Century Fox entertainment operation gained over 2 percent on Monday, or $1.1 billion dollars in market value, from its opening price. Its market capitalization is about $68 billion, reflecting Monday's gain.
"By divesting its less attractive legacy business, Fox has become a pure-play entertainment company with fantastic assets in its cable channels," Gabelli & Co analyst Brett Harriss said.
In contrast, shares of the new News Corp, which includes publishing assets like The Wall Street Journal and HarperCollins, and an education division, lost 3 percent, or half a billion, from their opening price. News Corp has a current market value of about $8.5 billion.
"News Corp is largely seen as ink on paper, and the perception is that the good assets, so to speak, went to Fox," said Gabelli & Co analyst Barry Lucas.
In addition to being seen as the "less valuable" assets from the old News Corporation, the "new" News Corporation education/print division is facing potential lawsuits in the United States related to phone hacking.
Norman Siegel has already filed one for Eunice Huthart, a stunt double for Angelina Jolie, who says she was hacked by News Corporation journalists working for the now closed News of the World and The Sun while on U.S. soil.
According to The Guardian, Siegel said at a press conference that "There are a bunch of people, the majority from England but some from here, who want to bring claims."
The Guardian article goes on to say that:
This is the first time that News Corp, parent company of News International, which controls the UK newspapers, has been named as a defendant in a case. It comes as the Justice Department continues to investigate News Corp under the Foreign Corrupt Practices Act (FCPA), used to pursue US companies accused of bribing foreign officials.
Siegel has also worked with the relatives of 9/11 victims who were also reportedly hacked by News Corp employees. Siegel said it was his understanding that a FBI investigation into those allegations was ongoing.
With News Corporation now split into two entities, court fees, fines and settlements related to both British and U.S. hacking claims will come of out Klein's education technology/newspaper division.
The Associated Press reports that:
News Corp. has spent $388 million in settlements, legal fees and other costs associated with ongoing investigations in the U.K. since the hacking scandal came to light in 2011.
It's not a mistake that just as the "new" News Corporation is debuting on Wall Street by losing 3 percent (half a billion dollars in valuation from its opening price) and is facing a new American front in the hacking scandal that could cost the company hundreds of millions of dollars, Klein is giving a speech touting his education "legacy" when he was NYC chancellor and attacking mayoral candidates who aren't on board with that legacy 100%.
They're looking to divert attention from the poor reception Wall Street gave to the education technology/newspaper division yesterday and the problems they're facing over future hacking claims that put the company's health very much in doubt.
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