BHP Billiton's shares closed almost four percent lower in Australia Wednesday, as investors fled over the lack of a stock buyback and the global mining giant's demerger plans.
The slump came as global credit agencies affirmed their ratings for the world's biggest miner and maintained a stable outlook.
The stock closed 3.91 percent lower at Aus$38.13 (US$35.43), with the sell-off following a similar scenario in London where the firm is also listed.
The company on Tuesday reported weaker-than-expected underlying earnings of US$13.4 billion and a net profit of US$13.8 billion.
BHP also outlined a proposal to create a new independent company by demerging non-core assets, including some of its aluminium, coal, manganese, nickel and silver operations.
But the Anglo-Australian resource major failed to announce the estimated US$3.0 billion share buyback that some analysts had been expecting.
Moody's and Standard and Poor's said their credit ratings for BHP remained unchanged, reflecting their expectations the split would have only a "minimal impact" on the company.
"The rating affirmation reflects the minimal impact that the proposed spin-off will have on BHP Billiton's business and financial profiles," said Moody's senior analyst Matthew Moore.
Standard & Poor's credit analyst May Zhong said the "new, leaner" firm was not expected to experience "materially different" cash flow volatility despite the moderate reduction in asset and commodity diversity.
- Investors disappointed -
CLSA resources analyst David Radclyffe said the stock decline could reflect disquiet from BHP's British shareholders, some of whom would not be able to hold stock in the new company due to overseas investment restrictions.
"We're in favour of the deal, but I can understand why the Plc shareholders feel a little bit left out," Radclyffe told AFP, referring to BHP's British listed shareholders.
The new entity, to be named NewCo, will only be listed in Australia, not London, with a secondary listing in Johannesburg.
Despite the market's early reaction, Radclyffe tipped worldwide demand for NewCo stock when it lists in 2015.
"Taking more of a global view, there's only a handful of companies that will be peers to this stock," he said.
"I think it will stack up reasonably well to those peers, and I think there will be global demand for this stock despite it being listed just in Australia."
BHP Billiton chief executive Andrew Mackenzie told reporters he did not believe the sell-off in London was a rejection of the demerger option.
"No, I don't think so," he was quoted as saying by Fairfax Media when asked if the share price fall was a sign the demerger was unpopular.
"We've had a number of pre-announcements of this over time and those were very much related to an outline of this transaction."
Mackenzie noted that the absence of a share buyback could be a possible factor.
"Expectations for (a) large capital management event were playing in peoples' minds," he said.
IG Markets strategist Stan Shamu said that in a capital-focused market environment, the lack of a share buyback weighed on shareholders.
"The general consensus is that, as a short-medium term investment -- particularly with the lack of capital return -- it is perhaps not the best place to be," Shamu said of analysts' outlooks for BHP.
"But there could be plenty of value to be unlocked in the long term."
By spinning off some assets into a new company, BHP said it would be able to focus more intensively on its core long-life operations -- iron ore, copper, petroleum, coal and potash.