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Media, communications stocks zigzag after Fox/Disney merger, net neutrality vote

After weeks of speculation, Walt Disney Co. and 21st Century Fox Inc. pulled the trigger on a deal that will expand the scope of one media conglomerate while slimming down another, in a move that rocked the media and entertainment industry on Dec. 14.

Mere hours later, the Federal Communications Commission voted to roll back the agency's regulatory oversight of internet service providers, in a controversial move impacting the communications sector.

SNL Image

SNL Image

Walt Disney and Fox both saw shares jump after the deal announcement, indicating a high amount of enthusiasm for the deal among media investors who rarely bid up the shares of acquirers immediately after a deal agreement is signed, as noted in an analysis by Kagan analyst Derek Baine. Disney will pick up an array of TV and film assets in the deal, which Kagan analysts peg as the fourth-largest cable network deal in history at $27.72 billion on a cash-flow multiple basis, as of Dec. 14. Fox will regroup around key broadcast and cable networks, including FOX (US) and FOX News Channel (US). Both companies said they expected the deal to fuel new direct-to-consumer streaming offers, with Disney set to become a majority stakeholder in streaming platform Hulu LLC.

Disney's stock to jumped 6.8% for the five trading days ended Dec. 15. For its part, Fox's stock popped 5.1%.

The deal news reverberated across media markets. Other network names moved strongly for the week, with Discovery Communications Inc. seeing one of the highest returns at 7.0%. Some analysts have suggested that a major bid for a network operator could increase speculation and valuation for others.

In the technology sector, Twitter Inc. also moved higher. The Street reported Dec. 14 that with improved operations at Twitter and the Disney-Fox combination, Disney may rekindle its interest in Twitter, which the company reportedly explored buying at least once earlier in late 2016. Twitter shares added 5.4% for the trading week.

Disney's movie studio also ended the week on a high note, with "Star Wars: The Last Jedi" moving into wide release. Forecasters expect it to rival some of the largest blockbuster film releases in history, potentially grossing over $200 million in its first domestic weekend alone. Some theater operators also saw shares move higher as the "Star Wars" opening neared. One of the biggest movers among exhibitors was AMC Entertainment Holdings Inc., which saw shares climb 3.1% for the five trading days ended Dec. 15.

Several internet service providers saw stock-market gains for the week after the Federal Communications Commission voted to roll back its net neutrality regulations and hand over investigation of potential unfair or anticompetitive practices of these companies to the Federal Trade Commission. The new FCC order passed Dec. 14 also eliminates the commission's previous rules prohibiting network operators from blocking or throttling legal internet traffic or prioritizing certain traffic in exchange for payment.

AT&T Inc. shares 4.1% for the trading week. Verizon Communications Inc. climbed 3.1%. Comcast Corp. shares jumped 4.6%. Charter Communications Inc. saw shares climb after the regulatory news, but then tumble back on Dec. 15 for a decline of 0.7% over the five days.

One of the biggest movers among ISPs was CenturyLink Inc., which at the end of the prior week announced it had completed an investigation into accusations that it wrongly and intentionally charged customers for services they did not purchase, a billing practice called "cramming," and found no evidence of wrongdoing. CenturyLink shares catapulted 15.8%.

Frontier Communications Corp., which has been plagued by investor skepticism throughout the year, was one of the few ISPs that saw shares tumble drastically during the week, shedding 17.1%.