Posted on 06/26/2002 6:53:55 AM PDT by Liz
SYDNEY, June 26 (Reuters) - News Corp shares fell 8.1 percent on Wednesday as traders used the stock as a proxy for the the U.S. Nasdaq market, which is expected to fall after telco giant WorldCom Group disclosed almost US$4 billion in accounting irregularities.
Shares in News Corp, the world's fifth-largest media company, dropped 86 cents to A$9.73 by mid-afternoon to levels not seen since December, 1998. The company's market capitalisation has shed A$10 billion in the past month.
"A lot of hedge funds which use short sales as a strategy are doing quite well at the moment and are using News Corp as a proxy for the Nasdaq," one media analyst said.
"There are fears of more accounting problems in the U.S. and one way around that, shorting the Nasdaq, is through News Corp. It has a high correlation with the Nasdaq, and those accounting problems are making the market jittery," he said.
The No.2 U.S. long-distance telephone and data services firm, WorldCom confirmed after the bell on Tuesday that an internal audit had found improper accounting of more than US$4 billion in expenses, fired its chief financial officer and said it would lay off 17,000 workers.
The TMT (tech/media/telco) sector was already under pressure globally, dragging all major markets lower.
News Corp is also facing stock specific worries such as concerns about advertising revenue, a costly Italian pay-TV deal which analysts believe it may now walk away from, and concerns about the value of its U.S. partner Gemstar-TV Guide International Inc which lost a key patent ruling earlier this week.
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