Updated from 9:30 a.m. EST

In rejecting a deep-pocketed suitor that had an eye on her ugliest asset, the Gray Lady may be ratcheting up her ongoing feud with Wall Street.

Shares of New York Times ( NYT - Get Report) were trading down Wednesday following news that the media conglomerate rebuffed an overture for The Boston Globe from a group of local investors headed by the former General Electric ( GE - Get Report) CEO Jack Welch.

According to the Globe, New York Times Chief Executive Janet Robinson said in a Nov. 17 letter that the Boston paper remains an important asset for the company and it's not interested in pursuing the sale. The story cited unnamed sources.

A New York Times representative couldn't be reached for comment on the report.

Welch and his crew, which also includes advertising executive Jack Connors and Boston concessionaire Joe O'Donnell, were reportedly offering $550 million to $600 million for their hometown paper -- roughly half of the $1.1 billion that the New York Times paid for it in 1993. Apparently, the Times doesn't have the appetite to swallow such a loss.

Wall Street, as usual, will take what it can get when it can get it. Shares of the Times are still up about 6.8% since the Welch team floated its interest in buying the Globe in late October. Investors see a quick payoff in dumping the newspaper that is weighing heavily on the company's overall results.

It all amounts to a classic tug-of-war between the short-term interests of disgruntled investors and the long-term interests of a newspaper family that wants to preserve its legacy.

"Wall Street and the Sulzberger family have totally different interests in this," says Edward Atorino, analyst with the Benchmark Company. "Investors want the stock price to keep going up. The Sulzbergers want to protect the longstanding political, economic and social agenda of The New York Times. Any effort to weaken the family's control is a threat to that, so they want to squelch any semblance of that right away."

The Sulzbergers have managed to enjoy the fruits of the public market while still retaining control over the family's franchise by maintaining a dual-class share structure, which keeps control of the company out of the hands of investors. With the rise of the Internet wreaking havoc on the company's business model in its publishing units, the public is getting restless.

Morgan Stanley Investment Management, which owns a 7.6% stake in the company, has proposed that the company separate the jobs of chairman of the company and publisher of The New York Times. Both positions are held by Arthur Sulzberger Jr., who has been the subject of criticism recently for his stewardship of the company and its flagship newspaper.

The firm also requested that the company's board allow shareholders a chance to vote on whether its dual-class share structure should survive. Atorino says the Sulzbergers have no reason to consider this proposition.

"Why should they even entertain that?" says Atorino. "They used the dual-share system in the first place so they wouldn't have to give in to stuff like this."

The Globe has been a big drag on its parent's profitability while its circulation reach dwindles as consumers in tech-savvy Massachusetts embrace the Internet for their information needs. For its third quarter, the Times reported a 5.1% decline in newspaper ad revenue. Its New England media group, which includes the Globe, posted a 12.4% drop, and the trend continued in October.

The company also had come under fire from Massachusetts politicos for slashing payrolls at the Globe and gutting its editorial operations. The criticism echoes similar complaints directed at Tribune and its management of the Los Angeles Times from local business groups in L.A.

Meanwhile, there is a proliferation of local investors approaching national media conglomerates in hopes of buying their hometown dailies. Recently, a local group bought The Philadelphia Inquirer and Philadelphia Daily News from McClatchy ( MNI - Get Report) for $515 million. Similar groups are also lining up in Los Angeles, Baltimore and Hartford, Conn., to bid for major metro dailies owned by Tribune as the company goes on the auction block.

For its part, New York Times is clinging to the Globe with hopes of weathering the storm that has hit the industry in the form of technological transformation. There's little hope on Wall Street that the company will ever recoup its investment in the Beantown paper, but the Sulzbergers seem ready to try whether investors are with them or not.

"They believe they can get the circulation to stabilize and get the costs down over time," says Atorino. "They're trying to work out a deal with the union. Things are looking good with the newspaper's Web site, Boston.com, and there's hope that has new retailers open shop in Boston in the near future, the tide will turn and things will start looking up. It'll take time."

Shares of New York Times recently were down 13 cents, or 0.5%, to $24.24.