The first sign of scepticism in the sharemarket has appeared about James Packer’s raid on the Ten Network and campaign to destabilise management and the board.

Sydney-based investment analyst Fraser McLeish, a well-regarded media analyst at RBS Equities, wrote in a note to clients today that because of the heightened strategic risk at Ten flowing from the Packer raid, shareholders should look to sell.

He cast doubt on the reported cost-cutting thinking of Packer and said there was more risk than reward from the reported new approach from the Packer camp.

This comment is in fact notable in that up to now it has been very, very rare that a broker or investment analyst would issue a note or comment critical of the Packer approach to the media or investment or corporate strategy.

But the note contains more. The basis of the comment is a wholesale rejection of the Packer approach, as relayed to the market by the usual informed sources briefing compliant media. That rejection and criticism of a Packer strategy is also very rare and shows that James Packer doesn’t carry the market clout that his father did. “There is widespread speculation that James Packer may look to drive major strategic change at Ten,”  McLeish wrote.

“We struggle to see material upside from changes to the existing strategy and believe the risk may outweigh potential reward. On a PE (Price Earnings Ratio) of 16x FY11F Ten trades at a hefty premium to ‘traditional’ media peers. Sell.”

Meanwhile, ever heard of the concept of “shadow directors  in Corporations Act? I bet James Packer reckons it won’t apply to him, but he had better be very careful at the Ten Network.

The concept of a shadow director is covered by the Corporations Law. This publication from the Australian Institute of Company Directors describes what a shadow director is:

“A shadow director is a person not formally appointed as a director but on whose instructions or wishes a company’s board members are accustomed to act. Those who appoint nominee directors may be considered shadow directors in certain circumstances.

“Shadow directors may face the same penalties and fines as properly appointed directors.”

Peter Fray

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