How Will News Corp Be Affected By Brexit?

News Corp (NASDAQ: NWSA) saw its stock price drop in the aftermath of the United Kingdom’s decision to leave the European Union. Although the stock price has started to recover, it still remains 5% below the pre-Brexit price. In addition to the negative market sentiment, the fall is likely driven by the interaction of the following two forces – the falling Pound and Euro, and a high dependency on Europe for its revenues.

1.  High Dependency On Europe For Its Revenues

News Corp U.K., the European subsidiary of News Corp, is the publisher of leading titles like The Sun and The Times. The sales of these titles account for approximately one-third of all national newspaper sales in the U.K. Moreover, News Corp has a large presence in Europe, deriving over 20% of its revenues from the region. Of this, the majority of the revenues are attributable to its U.K. customers. Economic uncertainty as well as a weakening Pound will likely put pressure on News Corp’s top line.

2. Weakening Pound And Euro

The value of the Pound has fallen considerably since the Brexit vote, and while the Euro didn’t fall by as much, it could accentuate problems for News Corp, which is struggling amidst a waning print media industry. 

To make matters worse, S&P 500 downgraded the UK’s credit rating to AA, from AAA, which will likely result in further fluctuations in the currency’s exchange rate.

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