Fairfax soars on Rinehart move
Fairfax Media shares have shot up, with market analysts speculating that Australia's richest person Gina Rinehart has increased her stake in the company to 10 per cent.
Two large parcels totalling 120 million shares were bought before the market opened for 81.77 cents, a 10 per cent premium on Tuesday's closing price of 74 cents.
Fairfax shares had shot up seven cents, or 9.46 per cent, to 81 cents by 1040 AEDT.
News Corp shares had lost six cents to $18.33, while Ten Network Holdings stocks, of which Rinehart owns 10 per cent, had increased by three cents to 91 cents.
It has been reported that Rinehart, a mining multi-billionaire, had enlisted stockbrokers Morgan Stanley to approach fund managers in a $192 million attempt to acquire 10 per cent of Fairfax and become its biggest shareholder.
Rinehart already holds four per cent of the company and if she is successful in her latest purchase, she will hold 14 per cent of the group, with a possible seat on the board.
Analysts said they were surprised that Rinehart would choose to buy into Fairfax, a struggling media empire laden with debt and a poor performing share price for many years.
"I've seen comments related to the campaign last year against the mining tax, and this could well be a platform," said CMC Markets chief market strategist Michael McCarthy.
"However, Fairfax has a reputation for fierce independence and a left-leaning journalist base."
McCarthy said Rinehart, with personal wealth that recently doubled to about $20 billion, was a hard-nosed businesswoman who had done outstanding deals and he doubted this was only about seeking a platform of influence.
"Maybe she's of the view that the great struggle this stock has had in transforming itself from a traditional media business into a new world media business has turned the corner," he said.
He pointed out that 20 per cent of 450 million Fairfax shares were short, making it one of the most heavily shorted stocks in the market, meaning fund managers had bet on it to fall further.
He predicted the stock to rise above $1 in the next week andsaid many people in short positions would be hurt.
OptionsXpress market analyst Ben Le Brun said he was surprised Rinehart would take on Fairfax, given its reputation for wrongly selling assets that were performing very well, such as the profitable Trade Me website in New Zealand.
"It's probably very good that someone like Gina Rinehart is giving them the tick of approval," he said.
Fairfax publishes newspapers including The Age, The Sydney Morning Herald and The Australian Financial Review and owns radio stations.