Rinehart close to 14%

Mrs Rinehart, Australia's richest person, has emerged as the single biggest shareholder in the media company, putting pressure on its directors to invite her to fill one of the newspaper, digital and radio group's vacant board seats.

Brokers Morgan Stanley continued to contact institutional investors yesterday, topping up the

5 per cent stake Mrs Rinehart amassed during a late-night raid on the 181-year-old media company on Tuesday.

By late yesterday Mrs Rinehart had added

186 million shares to her holdings in the owner of The Age, The Australian Financial Review and 3AW, paying 81.7? a share.

The buying spree took her holding to an estimated

12.8 per cent of the company, including a 4 per cent stake bought last year.

The shares surged 15 per cent before closing up 7.5?, or 10 per cent, at a three-month high at 81.5?.

Mrs Rinehart has not yet contacted Fairfax Media about the transactions, nor has the buyer of the shares been verified to either the company or its main investors.

Calls by The Age to Mrs Rinehart and her office were not returned. A spokesman for Morgan Stanley declined to comment.

Mrs Rinehart will be required to lodge a substantial-shareholder notice to the Australian Stock Exchange by tomorrow night.

Fairfax Media chief executive Greg Hywood declined to comment, citing issues related to share trading as a matter for the chairman. Fairfax chairman Roger Corbett was overseas and could not be contacted.

Some fund managers who hold stakes in the company said they would resist Mrs Rinehart joining the Fairfax board until she showed more experience in running publicly listed companies.

"It has to be the merits that she's the person for the job not simply because she has 10 per cent," said Orbis Australia fund manager Simon Marais, whose firm sold no shares into the book-build.

The development comes at a critical time for the media industry, which is battling a prolonged downturn in the advertising market and adjusting to a structural shift towards the internet.

A second fund manager said there would be "limited appetite" for Mrs Rinehart to move onto the board.

"I just don't see any experience there in what is a very tough sector," the fund manager said, although he was not authorised to speak publicly.

Since last year's exit of directors John B. Fairfax and his son Nicholas Fairfax from the board, two vacancies remain.

A source close to the Fairfax board said a move by Mrs Rinehart to 19 per cent the level just short of launching a takeover bid was a strong possibility.

However, this would require her to sell down her 10 per cent stake in Ten Network Holdings to clear current restrictions on media ownership.

Such a development would also put substantial pressure for Mr Corbett to step aside as chairman, paving the way for Mrs Rinehart to take charge.

Under present rules,

Mrs Rinehart cannot own more than 15 per cent of both Fairfax and the Ten Network.

A senior business figure who has had business dealings with Mrs Rinehart described her as "robust and tough" and someone likely to alter the media landscape.

"She knows James Packer and Kerry Stokes very well. She will be a fierce competitor to the Murdochs," the person said in reference to the family behind rival newspaper publisher News Corp.

Mrs Rinehart's Fairfax play has created a headache for hedge funds that collectively hold hundreds of millions of dollars worth of short positions in the company.

Fairfax, along with several other media stocks, is regularly targeted by hedge funds looking to make a profit through short-selling.

Short-selling is when hedge funds or other investors borrow shares and sell them in the hope that the price will fall. If it does, they buy them back at the lower price, return them to their owner and pocket the difference.

In total, some 12.4 per cent of Fairfax's shares are held by hedge funds.