UPDATE 2.50pm Fairfax Media shares have plunged to record lows after the company’s biggest shareholder, mining magnate Gina Rinehart, tried to sell a chunk of her shares.
Fairfax shares plunged 11 per cent to 45.5 cents today following news that Mrs Rinehart had sought to reduce her 15 per cent stake in the embattled media company by about one third on Thursday night.
The block trade, discounted one cent to the 51 cent closing price on Thursday, was not successful.
The previous record low for Fairfax shares was 49.5 cents, reached earlier in August.
One analyst, who asked not to be named, said the fall in Fairfax shares today reflected a revaluation of the company following its disappointing earnings results on Thursday.
Fairfax reported a $2.73 billion net loss for the 2011/12 financial year - driven by a $2.8 billion writedown to the carrying value of its newspaper mastheads and goodwill.
Chief executive Greg Hywood was gloomy about the year ahead, saying no turnaround was expected in the most difficult advertising market he had seen since the 1970s.
The analyst said that the downgraded earnings outlook for Fairfax meant the share price could fall further.
However the “massive” volume of shares changing hands on Friday - nearly 44 million by 3pm - meant a substantial shareholder was selling stock, the analyst said.
CMC Markets chief markets strategist Michael McCarthy said the plunging share price could be a reaction to the fact that 5 per cent of the company could not be sold at 50 cents a share.
Mr McCarthy said the feeling in the market was that the slim discount meant the share trade was probably not a genuine offer, but the lower share price would further Ms Rinehart’s pressuring of the Fairfax board.
"She’s playing a strong hand here,” Mr McCarthy said.
Ms Rinehart has been a vocal critic of Fairfax’s management and chairman Roger Corbett.
She has unsuccessfully sought two seats on the company’s board.
Independent stock broker Marcus Padley said there was speculation that investors had offered to buy Mrs Rinehart’s Fairfax shares for 45 cents each, but she declined.
"Presumably that was the message coming back from institutions that they wanted a bigger discount than the one cent discount, and a 10 per cent discount she might have got it away, but she obviously wasn’t prepared to take that price,” he told the ABC.
City Index market analyst Peter Esho said he would be surprised if Ms Rinehart sought to exit Fairfax entirely.
"Why come in at 60 cents and now just dump it,” he said.
"Nothing has emerged that’s changed the fundamentals of the business."
Mrs Rinehart, who is estimated to be worth at least $18 billion, made her first raid on Fairfax at the end of 2010 and has spent around $285 million building up a stake.
It is estimated she would lose up to $40 million if she quit her stake at current levels.
A market source told The West Australian that Mrs Rinehart has flagged quitting her entire holding.
"She can't get her way on the board, and it's probably not worth the distraction at the moment," the source said. "She has Roy Hill (mine) on the go and iron ore prices are falling."
It comes a month after she successfully sold another five per cent at 58 cents a share, to fund manager Perpetual according to other sources.
Yesterday's sale would have reduced her stake in Fairfax to about 10 per cent.
Neither her company, Hancock Prospecting, nor Perpetual returned calls.
Fairfax refused to comment on the sale.
One of Ms Rinehart's allies the Hungry Jacks businessman Jack Cowin, recently joined the board as an independent director.
Fairfax shares closed down 5.5 cents at 45.5 cents.