Sloan: The Wall Street Journal's Value

There’s a real difference between journalistic giants and stock market pygmies. That’s the lesson of Monday’s $5 billion hostile offer by Rupert Murdoch’s News Corp. for Dow Jones, owner of the nation’s leading business newspaper, The Wall Street Journal.

To most of us, of course, $5 billion is real money. But not to Wall Street. In a world in which you’ve got individual hedge-fund managers and private-equity players knocking down more than $1 billion a year, a deal of this size wouldn’t rate much more than a yawn if The Wall Street Journal weren’t involved.

While The Wall Street Journal is a wonderful paper, at least to me, Dow Jones has been a less-than-wonderful company and has been marked down by the stock market for its various shortcomings. Hence the disparity between Dow Jones’s immense journalistic value and its negligible market value.

Another company where there’s a huge disparity between journalistic and stock market significance is the New York Times Co., which has been under fire by some dissident shareholders for not getting its stock price up. The New York Times is arguably the nation’s most important newspaper, but its parent company is barely a rounding error in the stock market.

Look at these numbers. On Friday, the last trading day before Murdoch’s bid for Dow Jones was revealed, Times Co. was valued in the stock market at only $3.4 billion. Dow Jones was selling at even less—about $2.9 billion. According to Aronson+Johnson+Ortiz, a Philadelphia money-management firm, Times Co. ranked 477 in market value among the Standard & Poor’s 500
companies. Dow Jones ranked 487. In other words, they barely register in the market.

And wait, it gets worse. The Times Co. is sitting on a windfall because of the red-hot Manhattan real-estate market. It owns 27 of the 52 floors of the new New York Times Building and values that stake at more than $1 billion, or about $400 million more than it cost to build. (It has rented out five of those floors to a law firm and may rent additional floors.) If you adjust for the real estate, the rest of Times Co. was probably selling for about what Dow Jones would have fetched before Murdoch’s offer surfaced.

Contrast this with News Corp. Thanks to Murdoch’s decades of wheeling and dealing, a company that started as a modest outfit owning two small newspapers in Australia is now a worldwide, multimedia colossus with a stock market value of $70 billion. (As of Friday, it was No. 43 on the S&P 500.) This makes Dow Jones barely a mouthful for News should its controlling Bancroft family, which seems to have turned up its nose at his bid, decide to sell. It would be a neat double gain for Murdoch. First, the Journal’s credibility would add huge value to the business TV channel he is about to launch. Second, if he follows form, he would use the Journal’s news pages to promote his conservative agenda and increase his political and economic clout.

I’m not including The Washington Post Company, my employer, in this discussion, even though our $7 billion stock market value as of Friday makes us small beer, too. (Disclosure: The Post Company is by far my biggest individual stock holding.) Our situation’s different than the two other journalism companies because we’re widely diversified into other nonjournalistic businesses that have supported our stock price.

To those of us in journalism—and, I hope, to society as a whole—it really matters who owns journalistic trophies like The Wall Street Journal and The New York Times. But in the stock market, our business is insignificant. That’s a humbling thought, and not a particularly pleasant

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