Investors Boost Valassis, Insignia as News America Deal Hammers NWS Stock

Last Updated Feb 1, 2010 3:01 PM EST

Investors correctly guessed more than a year ago that News Corp. (NWS) would lose its anti-monopoly litigation against Valassis (VCI), if these three charts are to be believed.

Valassis Insignia News Corp. (Click to enlarge.) The first chart shows the $3.50 bump that Valassis got after News America Marketing Group, a unit of Rupert Murdoch's News Corp., agreed to settle Valassis' lawsuits for $500 million. The second shows the corresponding boost given to Insignia Systems (ISIG), a smaller supermarket coupon agency with a similar lawsuit against NAM that's still pending. The third shows the $2 loss since the beginning of this year that NWS has suffered as the Feb. 2 Valassis federal trial date drew near. The suits all revolve around the same issue: Whether NAM used predatory pricing techniques to illegally maintain a near monopoly on supermarket advertising and grocery coupons.

Not shown here are the 12-month performances of Valassis and Insignia. Valassis' has nearly quadrupled since last summer when it won a $300 million verdict from NAM. Insignia's has doubled.

While News Corp. can take comfort from the fact that its price today is still higher than it was when it lost the Valassis verdict, the lines all seem to show that investors believed months ago that Valassis and Insignia could win their claims. Meanwhile, it appears that NWS investors lost confidence in NAM's ability to prevail at the start of the new year.

With about 11 percent (or $3.9 billion) of its market cap wiped out since Jan. 1, perhaps News Corp. considered a $500 million deal a cheap way to stop the bleeding?