Shares in Fairfax had dropped more than three per cent in early trade after mining billionaire Gina Rinehart reduced her stake in the troubled media company.

Mrs Rinehart’s mining outfit Hancock Prospecting sold 86.5 million shares worth $50.1 million minutes after the Australian stock market closed on Thursday.

The move, which comes amid an ongoing battle by Mrs Rinehart to gain three seats on the Fairfax board, reduced the billionaire’s stake in the company from 18.7 per cent to about 15 per cent.

However she still remains Fairfax’s biggest shareholder.

Fairfax shares were two cents lower at 56.5 cents at 1017 AEST.

Fairfax has yet to comment on Mrs Rinehart’s share sell down.

Media analyst Steven Allen, of Fusion Strategy, said the stand-off between Fairfax chairman Roger Corbett and Mrs Rinehart over board seats was “becoming a pantomime”.

“You just wonder what Roger and the board think they’re doing,” he said.

“To have this public stoush with a major shareholder just doesn’t seem sensible. It’s just crazy.”

In a statement on Thursday, Hancock Prospecting said Mrs Rinehart had reduced her stake in Fairfax in reaction to issues surrounding an insurance policy for board directors.

The issue had been one of the key sticking points Mr Corbett had cited for not offering Mrs Rinehart a board seat.

Fairfax has a professional insurance policy, which is designed to offer legal protection to board members.

It includes a clause that requires directors holding more than 15 per cent to agree not to sue fellow directors or officers of the company otherwise the policy cover can be rendered void.

Hancock Prospecting said as Mr Corbett had not raised the 15 per cent limit, Mrs Rinehart’s company had decided to offload some shares to reduce her stake in Fairfax.

A Fairfax source said Mrs Rinehart’s decision to reduce her stake in the company still did not resolve the insurance issues surrounding directors.

“Nothing has changed,” the source said.

Meanwhile Mrs Rinehart’s ally, fast food mogul Jack Cowin, has said he has been acting as mediator between the mining billionaire and Mr Corbett.

Describing himself as the “Henry Kissinger of shuttle diplomacy”, Mr Cowin confessed to failing to make much progress in convincing Mr Corbett to allow Mrs Rinehart to join the Fairfax board.

“Where do they go from here? Question mark,” he told The Australian Financial Review.