What: Typically, when a major shareholder of a company sells their entire stake, the market reacts in an extremely negative way. Such has been the case for Fairfax Media Limited (ASX: FXJ) this morning after Australian mining billionaire Gina Rinehart offloaded her 14.99% stake for roughly $306 million.
So What: According to The Australian, Rinehart's decision to exit the company came as a result of "a series of bad decisions" made by the company's leadership team, in addition to the company having "no working plan" to address the issues facing the business. Indeed, Fairfax's woes have been well documented in recent years with the media giant having struggled to adapt to the major structural changes across the industry, although it has made progress in its effort to adjust.
As quoted by the Fairfax press, an emailed statement from John Klepec chief development officer of Rinehart's Hancock Prospecting said: "A series of bad decisions made by the leadership team has instead increased the number of publication errors and reduced the company's performance to cover news to standards expected to maintain the credibility of some of the oldest and finest newspaper mastheads in the country… Should the Fairfax Media leadership change, we may consider a future role in the company."
Rinehart sold roughly 353 million shares of the company at 86.75 cents per share, which represented a 9.6% discount to Friday's 96 cent closing price and comes before the company delivers its interim results on 19 February. While it is unknown who bought her stake, it is believed to have been sold to institutional investors.
Now What: Indeed, Rinehart's exit comes as another blow to the company's shareholders who have watched their investment struggle in the wake of the digital revolution. Although the stock has rallied since late-2012, it remains 84% down since 2007 at which time the shares traded for around $5.40. Although the company has made progress in its adjustment to the changing media landscape, it seems investors would still be better off looking elsewhere for superior investment opportunities.
