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Written by Billy Duberstein for The Motley Fool
A shareholder lawsuit was filed on Wednesday, alleging that bias in The New York Times' reporting of the Israel-Hamas war had damaged the company's credibility and reputation.
The suit is founded upon an internal whistleblower, who claims institutional bias against Israel and Jewish employees going back a decade.
The Times denies the claims, but will still likely incur increased legal costs in the near-to-medium term.
Shares of The New York Times Company (NYSE: NYT) plunged this week, falling as much as 11.9%, before recovering on Thursday to a 9.8% decline as of 2:09 p.m. EDT, according to data from S&P Global Market Intelligence.
On Wednesday, major shareholders, including the State Board of Administration of Florida (SBA) and the National Center for Public Policy Research (NCPPR), filed a lawsuit against The New York Times, alleging bias in its coverage of the Israel-Hamas war and associated damage to the paper's reputation.
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Whether the suit will be successful and what financial impact it will have on the company's financials remain unknown; however, it appears that at least some shareholders perceived sufficient risk to sell shares upon the suit's announcement.
The plaintiffs claim that, since the Times mentions its credibility and brand reputation as a core business asset in its financial documents, and that a perception of unreliable reporting could hurt the company's brand, shareholders are entitled to know whether management and/or the Board of Directors have cultivated a culture of bias, either intentionally or through negligence.
The suit asks a judge to compel the Times to hand over internal documents related to the Israel-Hamas war that the plaintiffs have already sought and that the Times has refused to provide for four months. Four months ago, in May, a protest was held outside the Times' New York City office following a particularly inflammatory op-ed that the Times published that week and refused to retract.
The plaintiff's suit is grounded in the testimony of an internal whistleblower, who spent a decade on the Times' video desk. The whistleblower claims she raised concerns about bias in the paper's coverage of Israel at least 15 times between 2019 and 2026, exhausting all official channels to no avail. The unnamed whistleblower made a statement to The Free Press this week saying, "The public deserves a better picture of how the Times manufactures the news when Jews or Israel are involved."
The plaintiffs also disclosed numerous examples given by the whistleblower to The Free Press, which appear quite disturbing if proven true by internal documents. One particular example was The Times hiring a freelance video journalist in Gaza to cover the war shortly after the attack of Oct. 7, 2023, who the Times had already stopped using in 2022 after the journalist's social media posts had praised Adolf Hitler.
Unsurprisingly, The Times rejected the lawsuit's claims, with a spokesperson stating to The Free Press:
This lawsuit has no merit and was brought for an improper purpose. Although it is positioned as a corporate governance petition to inspect the company's books and records, it is a transparent attempt to exert agenda-driven pressure against an independent media organization, level false allegations of bias, and chill journalism protected by the First Amendment.
Currently, whether the Times' coverage of the Israel-Hamas war is biased or not doesn't appear to be harming financial results, at least not yet. The Times has posted low-double-digit revenue growth in each of the last three quarters and has beaten revenue and earnings expectations every quarter over the past year. However, the last reported quarter ended in June, shortly after the May protest.
Additionally, The New York Times is involved in other lawsuits, but as the plaintiff. The Times is currently suing several AI model companies over the unlicensed use of its copyrighted work. This copyright issue is one that all media companies are looking to profit from in the AI era.
The outcome of these lawsuits on all sides remains uncertain, but one thing is for sure: The Times will likely incur additional legal costs in the near- to medium-term, both as plaintiff and defendant. Perhaps shareholders anticipate these cost headwinds, with shares down 8.2% year to date.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends The New York Times Co. The Motley Fool has a disclosure policy.