Comcast shares fell about 6 percent in trading Monday after the telecom giant’s $40 billion bid to acquire European cable network Sky triggered multiple Wall Street firms to downgrade its stock rating.
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Comcast outbid 21st Century Fox in the final stage of a three-round auction for a majority 61 percent stake in the company. Fox, which already owns 39 percent of Sky, offered roughly $32 billion for the remaining shares.
The hefty price tag led MoffettNathanson to cut its rating for Comcast to “neutral” from “buy.” The firm’s analysts expressed concern that Sky’s satellite TV model would ultimately weigh on Comcast at a time when consumers are increasingly abandoning traditional cable in favor of streaming services.
“The concept of the ‘winner’s curse’ is central to auction theory,” the firm said in a research note. “By the very nature of an auction, the so-called ‘winner’ of an auction is the party willing to pay more for an asset than any other party believes it is worth.”
Oppenheimer also downgraded Comcast, lowering its rating to “perform” from “outperform,” citing overall shifts and challenges in the media industry.
Fox shares rose about 1.5 percent in trading. CEO Rupert Murdoch’s company has already agreed to sell its 39 percent stake in Sky to the Walt Disney Company, which this year acquired Fox’s television and film assets in a deal valued at $71 billion.
Twenty-First Century Fox is the parent company of FOX Business and Fox News.