In an ominous sign for old school media in Australia, stocks of their counterparts in the US have got absolutely smashed over the past few days.
Reports out of the US has shown media stocks have plummeted almost nine per cent over the past week alone; the biggest losses since the GFC in 2008.
However, it should be noted the S&P Media Index has risen steadily from the lows of the GFC.
And it’s been the traditional media outlets – Time Warner, Fox, Disney, Viacom and subscription TV firm Comcast – that have taken the biggest hits losing $US50 billion respectively in the past two days over concerns for the US ad market.
The problem has been that hedge funds have always had a liking for media stocks in the US due to their high turnovers, good profits and constant takeover speculation; however their appetite seems to be fast changing.
More than $110 billion in media takeovers have been announced in the past 12 months, including Charter Communications Inc.’s pending $US79 billion purchase of Time Warner Cable Inc.
In the same period, media companies in the index repurchased an average $US2.22 billion of their own shares, more than any other industry in the S&P 500 apart from technology.
“It’s been a rough few days,” said Walter Todd of Greenwood Capital Associates who was quoted on Bloomberg.com. “People are shooting first and asking questions later. As an investor in Disney and Time Warner, this indiscriminate selling, to me, is just nuts.”
Added Scott Houlihan from OTA Limited Partnership: “People are buying other names in the space hoping valuations will increase for competitors and peers. Then again, you get a day like this where the whole sector gets devalued, and if you’re not hedged somehow you get punished.”