With news about the hacking scandal surrounding News of the World to acquire sensitive information, Rupert Murdoch’s BSkyB deal is now being scrutinized.  People are feeling queasy about investing in something that could possibly be acquired by a disgraced company.

British Sky Broadcasting is the most profitable British satellite company, and Deputy Prime Minister Nick Clegg urges Rupert Murdoch, chairman and controlling shareholder of News Corporation, to beg off from its supposed $12 billion bid for BSkyB’s 61% that News Corp does not already own.

Mr. Clegg urged Mr. Murdoch to “look how people feel about this — look how the country has reacted with revulsion to the revelations” about the phone-hacking scandal.  “Do the decent and sensible thing, and reconsider, think again about your bid for BSkyB,” Mr. Clegg said, referring to the satellite broadcaster by its initials.

And with others questioning the credibility of News Corp to proceed with this undertaking, BSkyB fell.

BSkyB declined as much as 7.6 percent to 693 pence in London trading, and traded at 700 pence at 2:08 p.m. Rupert Murdoch’s News Corp. in June last year offered 7.8 billion pounds ($12.5 billion), or 700 pence a share, for the 61 percent in the U.K.’s biggest pay-TV broadcaster it doesn’t already own. News Corp. dropped as much as 6.5 percent to $15.66 in New York.

As with anything involving negative publicity, you can expect its value to down, not up.  Once your image has been smeared, it will take a lot of time for you to clean things up, if you’re fortunate.  But some don’t have the luxury of ever recovering from a big hit again.

For Murdoch, it’s a chance to dominate even more of this saga, as News Corp. digs its heels in on the bid.  Investor interest continues to be shaky, though some core members are taking advantage of the situation, picking up shares as others flee.