News Corporation shares powered back through $20 for the first time since May 2008 this morning giving the 100% owner of Melbourne Storm a market capitalisation of $47.5 billion.

Therefore, the solvency of Melbourne’s rugby league franchise is not in question for as long as News Ltd is prepared to keep adding to the $66 million it has invested so far.

Rupert Murdoch’s family stake in News Corp is back above $6 billion and carries no debt and the man who has run the company uninterrupted for 57 years has a long history of supporting loss-making ventures.

However, as a declared seller of  Storm and News Ltd’s 50% stake in the NRL, hard questions need to be asked about what to do with Storm. The wrong move could cause enormous damage.

Who can forget the famous joint statement that Lachlan Murdoch and James Packer put out on May 30, 2001, when One.Tel collapsed, containing these words:

“Like all shareholders we are angry. We have been profoundly misled as to the true financial position of the company. We intend to explore all remedies available to us.”

And so was unleashed a fire-storm of publicity and legal battles that still continue nine years on from that day. Maybe One.Tel should have been supported.

Lachlan Murdoch remains a News Corp director but his replacement as executive chairman of News Ltd in Australia, John Hartigan, made comments about the Storm last Thursday that were of a comparable nature to those One.Tel claims.

However, it will be much more difficult to turn former Storm CEO Brian Waldron into the new Jodee Rich, as Ian McIlwraith neatly explained in The Age this morning.

In the case of One.Tel, News had invested $576 million for a 24% stake but with Lachlan Murdoch the only News representative on the One.Tel board, the plausible deniability was arguable.

Melbourne Storm was created by News Ltd and remains 100% owned. It will be impossible to pin the whole shooting match on Waldron while clearing the Storm directors and News Ltd executives who were ultimately responsible for its finances and governance.

Besides, any examination of News Corp’s corporate and editorial practices over a long period will turn up numerous examples of dubious behaviour.

Rupert Murdoch doesn’t shun controversy the world over, but Storm will be getting special attention because it is the biggest scandal in his home town of Melbourne where his mother still lives and his father made his name.

The collapse of Ansett would have been News’ biggest Melbourne-based controversy, but the Sun King brilliantly sold his 50% stake to Air New Zealand for $580 million in June 2000, booking a $240 million gain 15 months before the airline fell over.

Ironically, at about the same time as Ansett was sold a modest $10.75 million investment in another Melbourne-based company, realestate.com.au, ended up turning Australia back into a happy hunting ground for the Murdoch family.

REA Group shares have soared in recent years and News Ltd’s 60.7% is now worth a cool $1 billion, more than $900 million of which is clear profit.

All of this is important to understand the mindset of News as it contemplates what to do with Storm. Australia is no longer one of its worst performing countries as it was when One.Tel collapsed.

You see, the $500 million-plus in direct losses in Super League, the NRL and Storm also need to be offset against the surging profits that have been posted from News’ 25% stake in Foxtel and the 50% stake in Fox Sports.

However, rugby league has still been a poor investment for News because it created a wages spiral when setting up Super League and has never been able to put the genie back in the bottle. The players have lived high on the hog courtesy of Rupert Murdoch for 15 years now.

And how ironic that News now claims to be unaware it was paying even more to its 100% owned players than the competition rules permitted, further expanding the losses. Top News Ltd journalists would no doubt enjoy similar over-award treatment.

The only way for Storm to survive and prosper long term is for News Ltd to walk away offering a $15 million-plus subsidy to any Melbourne-based investor or consortium prepared to take it on.

And while cursing about these losses, Rupert’s boys should comfort themselves by looking at the fortune they are making out of Foxtel, Fox Sports and realestate.com.au in Australia.