Nexstar Media Group NASDAQ:NXST, a U.S. broadcast station owner, rose 8.8% on Tuesday after Federal Communications Commission Chairman Brendan Carr confirmed that the agency will vote on Aug. 6 to eliminate the nationwide television audience cap. The current rule limits a single broadcaster to reaching 39% of U.S. television households, while Nexstar's acquisition of rival broadcast group Tegna (TGNA) would create a combined company reaching roughly 80% of households. The FCC previously suspended the restriction specifically for the transaction, allowing the deal to close despite exceeding the existing limit. Replacing the cap with a case-by-case review process could provide a more favorable regulatory environment for Nexstar and may open the door to additional mergers across the broadcasting industry.
Other broadcasting stocks also moved higher as investors considered the potential benefits of looser ownership restrictions. E.W. Scripps NASDAQ:SSP, a U.S. broadcasting company, gained 12%, while Gray Media NYSE:GTN, a television station operator that has recently completed several smaller acquisitions, climbed 9%. Sinclair NASDAQ:SBGI, another broadcast group, made an unsolicited takeover offer for Scripps last year, although the proposal was ultimately rejected. Broadcasters have argued that the long-standing rules make it harder for local stations to compete with streaming services, social media platforms and nationally distributed media companies such as Comcast NASDAQ:CMCSA, a media company, and Walt Disney NYSE:DIS, an entertainment company. The National Association of Broadcasters supported Carr's plan, saying the restrictions apply to broadcasters but not to many of their competitors.
However, the proposed rule change and the Nexstar-Tegna transaction still face legal and regulatory uncertainty. A bipartisan group of state attorneys general and satellite television provider DirecTV obtained a court order blocking integration between the two broadcasters while their antitrust case continues, with a trial scheduled to begin next summer. Democratic FCC Commissioner Anna Gomez argued that Congress established the 39% limit and that only Congress has the authority to change or remove it, while public-interest groups, labor organizations and cable channel operator Newsmax NYSE:NMAX have also opposed relaxing the restriction. The FCC proposal is expected to pass in a 2-1 party-line vote, but investors may view the Aug. 6 decision as only one step in a broader legal process that could ultimately determine whether further broadcast consolidation can proceed.