Iron ore mogul Gina Rinehart may have crystallised a $63 million profit from her three-year investment in Fairfax Media, which she exited on Friday night, but that is heavily outweighed by losses on her 10% stake in the Channel Ten.
Rinehart made a surprising debut as a media investor when she pounced on the Ten Network in November, 2010 — by some reports, after a rush of blood to the head at a Sydney function to celebrate the 25th anniversary of Alan Jones’ broadcasting career.
James Packer spoke warmly at the tribute dinner, and within weeks Rinehart was piling into Ten alongside Packer and Lachlan Murdoch, picking up enough shares to join them on the board in an apparent bid for political influence. Rinehart’s favourite climate sceptic Andrew Bolt was soon given his own TV platform to carry on his low-rating Sunday morning shout-fests.
The Ten splurge was seen as pocket money for Rinehart, whose fortune was then just $5 billion, but would soon rise to $22 billion (and will soon fall right back to where it started). Hancock Prospecting’s initial substantial shareholder notice lodged on November 22, 2010, showed Rinehart had bought 104,613,672 shares over the previous fortnight for a total of $165.6 million, or an average entry price $1.58 each.
By December she’d acquired another 1.1 million shares — no price was disclosed — taking her total to 105,713,672 shares. But, within eight months she’d sold off those extra 1,190,000 shares for $1.1 million at an average sale price of 93 cents each, leaving her stake at 104,523,672 shares.
Ten shares plummeted as Packer and Murdoch wreaked their havoc on the company’s management and strategy, and by mid-2012 Rinehart, who also gave the company debt guarantees, was called on to contribute to a capital raising, tipping in $20 million for another 39,196,377 shares — at an effective price of 51 cents each — pursuant to Ten’s institutional entitlement offer on June 6, which did not raise her proportional voting power.
In December, 2012, in another capital raising, Rinehart sunk another $22,535,372.40 for another 112,676,862 heavily discounted shares, by now priced at just 20 cents each, emerging with her holding of 256,396,911 shares. Her stake rose temporarily, lifting to an 11.09% stake, but dropped back to 9.91% after the retail component was completed.
That was the same holding declared when a very frustrated Rinehart went off the board last November 4, replaced by Hancock executive John Klepec.
According to Intelligent Investor, Ten has not paid a dividend since November, 2011, when it paid 5.3 cents a share, fully franked, meaning Rinehart would have been paid $5.5 million on her then holding of 104,523,672 shares.
Totalling the outlays ($165.6 million in 2010 plus $20 million in June, 2012, then another $22.5 million in December that year), Rinehart has sunk $208.1 million into the ailing network. After her single 2011 dividend, that leaves Rinehart down $202.6 million. If she could get out of Ten at yesterday’s 21-cent close, her holding of 256,396,911 shares would be worth $53.8 million — meaning Rinehart has lost some $148.7 million on her investment.
As Crikey wrote yesterday, Rinehart made a $63 million, or 7% p.a., return over three years on a $280 million investment in Fairfax Media. Not enough to make up for the Ten disaster: in total, Rinehart is down $85.3 million on her ill-advised media investments, totalling almost half a billion dollars, and she is not out yet.
The investment was to further her other business interests. A complete loss on Fairfax was acceptable as long as her other objectives were achieved.
Also if Fairfax was destroyed is was one less possible LNP critic
Someone once said, ‘if you wonder what god thinks of wealth, lokk at the people that have it’.