In its first day of trading on the NASDAQ, Fox Corp. shares declined more than 3% to close at $40.34.
The decline, which began minutes into the trading day and kept shares close to the $40 mark throughout the session, ran counter to generally upbeat assessments of Fox from Wall Street analysts in recent weeks. After shedding two-thirds of its operations in a $71.3 billion deal with Disney that is set to close at 12:02 a.m. ET, Fox is now a stand-alone business mostly encompassing the Fox broadcast network, Fox News, Fox Sports and local stations.
It already was fated to be the case that Fox Corp. would trade lower than 21st Century Fox as a simple matter of deal mechanics. According to an SEC filing, 0.263183 of each share of 21st Century Fox was exchanged for one-third of a Fox Corp. share as the stand-alone entity begins its run. 21st Century Fox, whose film and TV assets are being acquired by Disney, closed Monday trading at $51.36.
A 10Q filing on Monday by Fox contained a few signs that might have spooked Day 1 investors, including a forecast for a slowdown in affiliate fee growth in cable networks in the second half of fiscal 2019. Given that outsized importance of Fox News, Fox Business and FS1 in the new structure, any disturbance on the affiliate side can have consequences for the stock price. Other question marks include the size of the spin tax that Fox will owe to Disney.
Veteran media analyst Michael Nathanson of MoffettNathanson issued a report to clients affirming his “buy” rating on Fox, though he trimmed his 12-month price target by $1 to $50. The slowdown in affiliate revenue, he said, was “at first glance … a red flag,” he wrote. But when considering it further, “We think that too much focus on the near-term numbers clouds the view of the compelling story at New Fox.”