Rinehart may move on Fairfax: analysts

FAIRFAX Media shares hit a record low yesterday as the market waited for the next move by the media group’s largest shareholder, mining magnate Gina Rinehart.
Nanjing Night Net

The shares plunged about 12 per cent at one stage, trading at 44.5¢, after Mrs Rinehart’s unsuccessful attempt to offload a 5 per cent stake in the company.

Following a record loss by Fairfax on Thursday, her broker, Morgan Stanley, tried to offload 117 million shares at 50¢ but was knocked back by a market that failed to bite at the price – a 1¢ discount on the closing price.

Yesterday was the sixth-biggest trading day for Fairfax’s shares in a year, with 56 million of them changing hands for 45¢. Multiple parcels of up to 3.3 million shares traded after market close, according to Bloomberg. Broking firm UBS traded 13 million Fairfax shares while Morgan Stanley traded 5.6 million shares.

Media reports yesterday morning suggested institutional investors showed no interest in paying above 45¢ a share.

The corporate regulator was staying silent on questions over whether the sale was a means of testing the market to see how low Fairfax shares could go.

A spokesman for the Australian Securities and Investments Commission would only say: ”We are unable to comment on operational matters or specific companies.”

Now that the stock has reached a record low, speculation is swirling around Mrs Rinehart’s intentions.

A rumour flew through the investment community that Mrs Rinehart never intended to sell the shares on offer, but knew the cheaper offer would push the price down. This would make it cheaper for her to buy more shares or put additional pressure on the board.

One broker said: ”If it keeps falling then I think we fully expect her to make a bid for the company and probably move in to break it up.”

She said shareholders were holding out to make a profit in the event of a break-up while fund managers who knocked back the offer on Thursday afternoon said they preferred to buy into companies with certainty.

Mrs Rinehart’s office did not return calls.

Following the $2.8 billion write-down by Fairfax on Thursday and a gloomy outlook for the short term by chief executive Greg Hywood, analysts yesterday cut their earnings forecasts for this financial year. Mr Hywood said the company was facing the ”perfect storm of structural change and cyclical downturn”.

Mrs Rinehart has laid out an estimated $285 million on Fairfax shares, building up a 18.7 per cent stake. Early in July she cut her stake to 14.99 per cent to meet rules surrounding a corporate insurance policy held by Fairfax.

Fairfax made no comment.

Fairfax shares closed down 5.5¢, or 10.78 per cent, at 46¢.

This story Administrator ready to work first appeared on Nanjing Night Net.