The last of Ten Network's billionaire investors backs the broadcaster's second capital raising in six months.
THE last of Ten Network's billionaire investors has backed the struggling broadcaster's second capital raising in six months.
Mining billionaire Gina Rinehart decided to participate fully in the institutional component of the $230 million capital raising before the 5pm deadline on Friday. This ensures she will maintain her 10 per cent stake in the media company.
Shares that were not picked up by institutional shareholders were to be redistributed for sale on Friday, but the word from institutions was that no big blocks of shares were available - a signal that Mrs Rinehart had taken her entitlement.
Investors are paying 20? a share and are entitled to four new shares for every five they own. The stock traded above $1.50 in November 2010.
The decision answers questions, for now, about whether Mrs Rinehart still has an appetite for media stocks after making big losses on her investments in Ten and Fairfax Media, owner of The Age.
After the shareholders' meeting on Thursday, Mrs Rinehart was blunt about Ten's shortcomings.
''I think that we have to be more prompt on where we could cut costs. Over the last two years, I think we could have done more there,'' she said. ''Obviously we're not doing well enough yet with our programming, so these are things that I hope we'll see improvements on. I think we're right to be heading to that particular age category [18-49] as our main demographic, because they do a lot of the advertising.''
Ten chairman Lachlan Murdoch said on Thursday that the network's other billionaire shareholders - James Packer, Bruce Gordon and himself - would participate in the raising, which he described as ''prudent'' given the deteriorating outlook for media.
''Poor execution of our spring programming schedule, compounded by a weak advertising market, has negatively impacted our results,'' Mr Murdoch said at the meeting.
He failed to offer any words of support for the man who replaced him as chief executive less than a year ago, James Warburton.
Analysts said that the latest capital raising - which is on top of a $200 million raising in July, and the sale of the company's outdoor advertising business in October for about $100 million - tackled concerns about its balance sheet but not operational issues.
JPMorgan is now forecasting an 18 per cent revenue decline for Ten in this half-year ''given the poor ratings start to the year, in a weak TV advertising market''.
Ten has even lost share in the 18-49-year-old audience that it is targeting, according to Deutsche Bank, which says the company generated no operational cash flow in the first quarter and that cash flow may look worse in the second quarter due to annual licence fees and programming costs.
Frequently Asked Questions about this Article…
What did Gina Rinehart decide about Ten Network’s $230 million capital raising?
The article reports that mining billionaire Gina Rinehart participated fully in the institutional component of Ten Network’s $230 million capital raising before the deadline, ensuring she maintains her roughly 10% stake in the broadcaster.
What were the terms of Ten Network’s share offer in this capital raising?
According to the article, the raising was structured so investors were paying "20? a share" and were entitled to four new shares for every five they owned. Shares not taken up by institutions were to be redistributed for sale, though reports suggested no large blocks remained available.
Why does Rinehart’s decision to back the capital raising matter for everyday investors?
Rinehart’s participation signals that at least one major shareholder is willing to keep supporting Ten Network and maintain a significant stake. The article says her decision answers, for now, questions about her appetite for media stocks after past losses and that other billionaire shareholders also agreed to participate, which can help shore up investor confidence in the short term.
What concerns about Ten Network’s operations did Gina Rinehart raise at the shareholders’ meeting?
Rinehart was blunt about Ten’s shortcomings: she said the company needs to be more prompt in cutting costs, that programming performance is not good enough, and that focusing on the 18–49 age demographic is the right approach because that group drives much of the advertising market.
What did Ten chairman Lachlan Murdoch and other major shareholders say about the raising and the company’s outlook?
Chairman Lachlan Murdoch said he, James Packer and Bruce Gordon would participate in the raising and described the move as "prudent" given a deteriorating media outlook. Murdoch also blamed poor execution of the spring programming schedule and a weak advertising market for negative results, and he did not publicly back CEO James Warburton at the meeting.
Will the capital raising solve Ten Network’s operational problems?
Analysts quoted in the article said the latest capital raising helps address balance-sheet concerns but does not fix underlying operational issues. JPMorgan forecast an 18% revenue decline for the half-year given a weak TV advertising market, and Deutsche Bank noted the network lost share in the 18–49 audience and generated no operational cash flow in the first quarter.
What recent funding moves and asset sales has Ten Network completed before this raising?
The article notes this $230 million raising is on top of a $200 million capital raising in July and follows the October sale of Ten’s outdoor advertising business for about $100 million.
What should everyday investors watch next for Ten Network after the capital raising?
Investors should watch TV ratings and the network’s success in the 18–49 demographic, advertising market conditions, programming execution and costs, and operational cash flow (especially given annual licence fees and programming expenses). These factors will determine whether the company’s performance improves beyond the balance-sheet relief provided by the raising.
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