By Danny John
Shares in Ten Network lost as much as 25% in early trade after the broadcaster decided not to proceed with a plan to sell 120 million new shares.
Ten shares closed the day down 13 cents, or 14%, at 80 cents after earlier sliding as much as 25%.
With market sources indicating that Ten had received offers of as little as $10 million worth of new shares even with the attraction of a 20% discount to Monday's closing price of 93 cents, the decision underlined the difficulties faced by the media sector in the economic downturn.Last night's move indicated that Ten's stock price could drop to the "floor" of 75 cents that the company had placed under the issue of 120 million new shares.
That was the main condition, the company said two days ago, for determining whether the capital raising would proceed.
But that was not enough to tempt Ten's existing shareholders or any new investors to buy into the company, particularly after its controlling shareholder, the Canadian media group CanWest, declared that it would not participate in the issue.
The exercise was not helped by a series of analyst reports which said the price was too high. Brokers had put a value of between 33 cents and 41 cents as a more likely figure.
Ten said last night that "difficult" market conditions had resulted in offers which were not acceptable to the company. It refused to divulge what prices had been lodged.
"We made it clear from the outset that this measure was being undertaken proactively and that we would not proceed with an equity raising unless we could achieve an acceptable outcome, " said Ten's executive chairman, Nick Falloon.
The company decided to go to the market after announcing that its net profit for the first half - due to close at the end of this month - would fall by 28 per cent. The result will also be hit by write-downs of $148 million suffered by its outdoor advertising operation, Eye, and on some of its TV programs.
Ten had hoped to use the extra money to bolster its balance sheet, which it maintained last night was still well capitalised.
Because of the decision to abandon the cash injection, CanWest will retain its holding at 56.6 per cent.
But it will add to the widely held market view that both CanWest, which is selling domestic TV assets to reduce debt, and Ten are doing it particularly tough as advertising revenue falls away.
One of the consequences of Ten's move was to send shares in Fairfax Media below $1 for the first time. Fairfax, the publisher of this website, will release its first-half results next week. Its shares were at 99 cents in early trade today.