If you look at News Corp’s stock price since July 4, you might wonder whether you’re peering into a parallel universe. This is a period during which the company’s been battered by damaging revelations from the News of the World phone hacking and police bribery scandals. But investors seem unconcerned. After an initial dive, News Corp stock rebounded and now almost exactly matches the performance of the overall market — the company and the benchmark Standard & Poor’s 500 index both are down about 10%. It’s easily explained. Investors like all the cash Rupert Murdoch’s cable networks generate. They’re delighted by News Corp’s begrudging agreement to repurchase $5B of its stock. Shares also are relatively cheap: Many investors still fear that Murdoch will make a crazy acquisition — like he did in 2007 when he spent $5B for Dow Jones. News Corp trades for about 10 times expected earnings while Viacom is close to 13.5, Comcast is about 12, and Disney’s around 11.3. So News Corp is a smart buy if you believe that the scandal will force Murdoch to placate investors and will blow over before it seriously damages the company’s finances. Similar cases often do.

But this one probably won’t — and it will be interesting to see how long it takes before investors become frightened. Investigations into possible lawbreaking at News Corp are just getting started. That’s a sobering thought when you consider how much has already happened since July 4, when The Guardian broke the scandal open with its report that NOTW in 2002 tampered with voicemails of a missing schoolgirl Milly Dowler, later found murdered. Murdoch had to abandon his $12B effort to buy the 61% of BSkyB he doesn’t already own. Many UK officials want News Corp to sell off its holdings in the satellite power. Meanwhile, Murdoch probably won’t be able to turn News Corp over to his son James. Parliament’s Culture, Media and Sport Committee says it will ask him to testify again as members bear down on allegations that James tried to cover up the extent of NOTW’s lawbreaking. Scotland Yard, embarrassed by reports that police accepted bribes to help NOTW phone hackers, is working the case hard and has already made 16 arrests. Potentially damaging evidence is still surfacing: Last week, News International said that it found “many tens of thousands” of emails and other documents about NOTW. Former News International CEO and NOTW editor Rebekah Brooks — one of the people who has been arrested — is among the many witnesses who’ll testify at a UK judicial inquiry that’s just beginning. The U.S. Justice Department is investigating whether NOTW hacked the phones of families of 9/11 victims. And News Corp faces dozens of civil suits. Hacking victims want to be compensated for their lost privacy. In addition, many shareholders want company directors to atone for rubber-stamping Murdoch initiatives that seemed to put his family’s interests ahead of investors’. Examples include News Corp’s $675M purchase of Elisabeth Murdoch’s TV company Shine — critics say the price was way too high — as well as the company’s failure to investigate NOTW’s hacking. Investors will have a chance to vent their anger at News Corp’s annual meeting Oct. 21: The company plans to fight a shareholder resolution that would strip Murdoch of the chairman title by requiring that the job be held by an independent board member.

We’re already seeing some cracks in the consensus view that the scandal affects a relatively small and isolated part of News Corp. Influential media analyst Laura Martin of Needham & Co recently downgraded company shares to “hold” from “buy.” She says that the impact of the scandal will “get worse before it gets better” in part because “litigation costs will be a new meaningful cost center for (News Corp) for the foreseeable future.” It’s also interesting to see potential News Corp allies tip-toe away. New York State’s Comptroller recently bailed out of a $27M contract with a News Corp education service unit saying that “the record remains incomplete with respect to the vendor responsibility issues.” In other words, the state doesn’t like the way things smell at News Corp. That’s also the most plausible explanation for Kleiner Perkins Caufield and Byers co-founder Tom Perkins’ announcement that he’ll leave the News Corp board when his term expires in October. His decision means the board will lose one of the only members who’s respected by corporate governance experts. Perkins won them over in 2006: He resigned from the Hewlett-Packard board after then-chairman Patricia Dunn let security experts secretly track directors’ personal phone calls to find out who had leaked information to the press. Murdoch likely was grateful for Perkins’ credibility when he said in July that “there’s no reason to believe” News Corp’s top management had lied about the NOTW scandal. Considering how much Murdoch needs that kind of support, it’s hard to believe Perkins’ glib explanation that the scandal had nothing to do with his decision to leave — that the board doesn’t need someone other than Murdoch, who’s over 80.

The Murdoch family also appears to be growing more concerned about the scandal. Nobody squawked several weeks ago when News Corp directors decided that executives were doing a splendid job: The board awarded the top five execs $115.2M in compensation for the year that ended in June. That’s up 43.7% from last year for a period when the stock price rose 24.5%. But James apparently changed his mind about his pay by late August, when the information was released. Citing “the current controversy surrounding News of the World,” he said that he would decline his $6M bonus. That was a potent symbol. No need to feel sorry for James, though: Even without the bonus, he wound up with $11.9M — a 15.8% raise vs 2010.