An “irrevocable” trust?
Rupert Murdoch is showing yet again that real life can be more fascinating than fiction.
News that the 93-year-old mogul is secretly waging war against three of his children — by seeking to change the terms of the irrevocable trust that oversees the family’s business empire — has gripped media watchers around the world.
The battle, which is taking place in a Nevada probate court and was first reported by The Times’s Jim Rutenberg and Jonathan Mahler, isn’t just a tale of familial strife. It’s about control of a global media business with extraordinary political power, one that’s still trying to preserve its influence in America and elsewhere.
The context: When Murdoch dies, control of the family’s companies, including the broadcaster Fox and the newspaper publisher News Corp, will be shared among his four eldest children via the trust.
Under the arrangement, Prudence, Lachlan, James and Elisabeth will each get an equal say in how the businesses are run.
But as The Times’s Edmund Lee pointed out in DealBook last year, Murdoch himself remains in charge of the trust until his death — despite ostensibly retiring in September and becoming chairman emeritus of Fox and News Corp — ensuring he still holds the reins over the companies.
But Murdoch now wants Lachlan to have majority control when he dies. A sealed court document obtained by The Times notes Murdoch’s concern that a “lack of consensus” among the children “would impact the strategic direction at both companies including a potential reorientation of editorial policy and content.” (None of the children’s economic stakes would be affected.)
In other words, Lachlan, who is chairman of News Corp and executive chairman and C.E.O. of Fox, should be given control to ensure that the family’s properties stay conservative, according to a sealed court document obtained by The Times.
There’s only one way to change the trust: if the amendments were made in good faith and with the sole purpose of benefiting all of its members. Representatives for Murdoch say that keeping Fox and his other businesses on the political right would ensure its continued business success, benefiting all of his heirs.
The move has set off a new Murdochian civil war. James, Elisabeth and Prudence have united to oppose their father’s efforts and line up against Lachlan. More from The Times:
After filing his petition to amend the trust, Mr. Murdoch met separately with Elisabeth and Prudence in London, hoping to win their support, this person said. Instead, they were furious. Elisabeth responded to the possibility with a string of expletives.
Lachlan was the only one of the four elder children to attend Murdoch’s marriage to Elena Zhukova, his fifth wife, last month.
James has been a particular thorn in his father’s side, according to The Times. The former Fox executive and his wife, Kathryn, a climate change activist, have occasionally made public criticisms of the company’s move further to the right.
Murdoch believes that Fox’s conservative success made James and his siblings multibillionaires. The father’s representatives have referred to James among themselves as the “troublesome beneficiary.”
The fight comes at a critical point for the Murdoch empire. Fox News remains a potent business force, regularly demolishing its broadcast rivals in viewership. But Donald Trump’s dominance of Republican politics has forced Murdoch to walk back his efforts to break ties with the former president.
And Murdoch is still a player in American politics, despite Trump ignoring his advice on a running mate. He showed up at the Republican convention this month. And Trump is set to appear on Fox News this morning.
HERE’S WHAT’S HAPPENING
President Biden says there’s “a time and a place for new voices.” In his first address since announcing he would not seek re-election, the president said he deserved a second term based on his record, but that the best course for the country was to “pass the torch to a new generation.” Jeffrey Katzenberg, the Hollywood mogul who co-chaired Biden’s campaign and later became a focus of donor ire, wrote in a Times guest essay that the decision was “honorable” and “selfless.”
The N.B.A. rebuffs Warner Bros. Discovery on broadcast rights. The league announced agreements on Wednesday with Amazon, Comcast and Disney, formally rejecting an 11th-hour bid by Warner Bros. Discovery to keep showing games. (The deals are collectively worth $76 billion over 11 years.) But Warner Bros. Discovery said the N.B.A. had “misinterpreted our contractual rights,” suggesting it may challenge the decision in court.
China cuts a key interest rate for the second time this week. The country’s central bank lowered the one-year rate for loans to commercial banks to 2.3 percent from 2.5 percent, its biggest such reduction since 2020. The rate is a guide to commercial banks for loans to corporate customers and local governments, and the change comes as Beijing seeks to revive economic growth.
A market rout goes global
U.S. stock futures are wobbling this morning, after European and Asian markets fell following the worst day for U.S. equities in two years.
The reason: After piling into technology stocks because of the promise of artificial intelligence, investors are now worried that heavy spending on A.I. won’t translate to commercial returns any time soon.
Tech stocks dragged down indexes again. Shares in chip makers tumbled in Japan, South Korea and across Europe. That was spurred by a nearly 7 percent drop in Nvidia, the market leader, which led the Nasdaq composite to its worst day since October 2022 and the S&P 500 to close down 2.3 percent.
Tesla and Alphabet earnings also spooked markets. Elon Musk’s electric vehicle maker fell more than 12 percent on Wednesday, its worst performance in two years, after reporting that second-quarter profit fell by almost half year-on-year. More notably, shares in Alphabet closed down 5 percent, as concern about the payoff from growing spending on A.I. trumped better-than-expected profit.
The declines underscore the outsize influence of the so-called Magnificent Seven companies. Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla have lifted markets for months, the biggest beneficiaries of investor enthusiasm for A.I.
But Wednesday was the worst performance for the group since ChatGPT was introduced in November 2022, falling 4.6 percent and wiping more than $768 billion off their collective market value.
Many investors are now predicting a huge rotation, in which smaller-cap stocks that are primed to benefit from the Fed cutting interest rates become the biggest drivers in the markets. Indeed, the Russell 2000 index has dramatically outperformed the megacap-heavy S&P 500 over the past month.
Luxury stocks got hammered, too. Weak sales at Bernard Arnault’s LVMH, the world’s biggest luxury group, spurred a wider sell-off across the sector. (Worth noting: Arnault’s fortune has fallen by $20 billion this year, the most of any of the world’s richest people, according to Bloomberg.)
A big concern for the sector is China. The industry has relied on Chinese consumers but a slowdown in the world’s second-largest economy has hit their spending at home and overseas.
What’s next: U.S. G.D.P. data is set to be published at 8:30 a.m. Eastern, and a strong performance could add to pressure on the Fed to cut rates.
Investors are also keeping an eye on Big Tech, with Amazon, Apple and Meta reporting quarterly earnings next week.
“He’s got a cult following.”
— Erik Herzfeld, president of the investment firm Thomas J. Herzfeld Advisors, on how the financier Bill Ackman has used his growing social media presence to help the I.P.O. of Pershing Square USA, an investment fund. Ackman made his name as an activist investor, but has become a prominent voice in politics and the culture wars on X.
What would Harris do on regulation?
Vice President Kamala Harris has been by President Biden’s side as his administration has taken an aggressive approach to antitrust enforcement and regulation. But how would Harris deal with antitrust and regulation if she moved into the White House?
She hasn’t been a public voice on these issues in the past four years: Some experts predict Harris will take a softer approach, but others expect the tough approach to continue, The Times’s Danielle Kaye writes for DealBook.
The optimistic view is that changes will be made at the regulators. “Lina Khan’s days would probably be numbered under Kamala Harris,” Jeffrey Sonnenfeld, a professor at the Yale School of Management, told DealBook, referring to the chair of the F.T.C.
CNBC’s Jim Cramer thinks Harris would replace Khan and Jonathan Kanter, the Justice Department’s antitrust chief, given Harris’s links to the tech industry in her home state of California. Biden and Harris are “very different people,” he said.
Others think it’s unlikely that Harris would pivot from the key pillars of Biden’s competition policy. During her presidential campaign in 2019, Harris called Facebook “a utility that has gone unregulated” and “that’s got to stop.”
That hinted at the type of breakups that have been at the top of the Biden administration’s antitrust agenda, with lawsuits against tech giants like Apple and Amazon.
As California’s attorney general, Harris took on corporate consolidation. In health care, she supported crackdowns on alleged anti-competition conduct and mega-deals. Harris’s office joined a federal suit to block the Anthem-Cigna health insurance merger. And she investigated several major hospital operators in California, including Sutter Health, over whether consolidation was driving up costs for patients.
“On antitrust, I think there’s a good chance she’ll continue to be tough,” said Olaf Groth, who teaches business and public policy at U.C. Berkeley’s Haas School of Business. “C.E.O.s and large investors will probably stay vigilant on that front.”
But Harris hasn’t been that vocal about Biden’s antitrust agenda. She has publicly supported some of the administration’s high-profile initiatives, like the F.T.C.’s move to end noncompete agreements. “We banned noncompetes that unfairly prevent workers from taking better-paying jobs,” Harris said at a union convention in May.
Whether she would diverge from the view of many in the Democratic Party that antitrust enforcement had been too weak for decades leading up to Biden’s presidency is an open question.
THE SPEED READ
Deals
A surge in fund-raising suggests that the blank-check investing vehicles known as SPACs may be starting a comeback. (FT)
John Tuttle, the longtime New York Stock Exchange executive and top salesman for potential I.P.O.s, is leaving after almost two decades. (WSJ)
Elections, politics and policy
U.S. intelligence agencies warned American start-ups and venture capitalists to be wary of investments that actually come from hostile foreign powers seeking sensitive technology. (Bloomberg)
“‘Intellectual combat’: Inside the fight to upend GOP economics” (Politico)
Best of the rest
“The Illicit Flow of Technology to Russia Goes Through This Hong Kong Address” (NYT)
How an American energy company became an unprofitable bet for meme-stock investors. (Bloomberg)
Cameo was once a billion-dollar start-up. Now it can’t afford to pay a $600,000 fine. (Business Insider)
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