GM stock tumbles on Kerkorian sale
Shares of nation's largest automaker stumble amid concerns about Kerkorian's trimming his holdings by 14 million shares.
NEW YORK (CNNMoney.com) -- Shares of General Motors plunged Wednesday as billionaire investor Kirk Kerkorian disclosed he had sold 14 million shares of the stock earlier this week, as he turned his sights on increasing his holdings in casino operator MGM Mirage.
His investment firm Tracinda Corp. said in a separate filing early Wednesday that is it looking to buy up to 15 million additional shares of MGM Mirage (Charts), at a 12 percent premium to Tuesday's closing price.
Shares of GM (down $1.52 to $31.09, Charts), the best performer on the Dow this year, were down more than 4 percent in trading Wednesday. Shares of the automaker were down 11.6 percent from Friday's close, before Kerkorian made his below-market-price sale at $33 a share. But shares of MGM Mirage gained more than 10 percent.
Kerkorian's sale of GM shares will reduces his holding at GM to 7.4 percent from 9.9 percent. His filing did not give any reason for the sale, and it includes the statement that he might decide either buy or sell additional shares "based on market and general economic conditions, the business affairs and financial condition of General Motors, the market price of its shares" and other factors deemed relevant.
His MGM Mirage filing stated, "This tender offer demonstrates our confidence in MGM Mirage and its management and our commitment to the company's future." A spokeswoman for Tracinda said he would have no comment on the moves beyond the filings. GM also had limited comment on the filing.
"It's our practice not to speculate on the motivations, actions or potential actions of shareholders," said GM spokeswoman Gina Proia.
Kerkorian had paid an average of just a bit more than $30 a share for the 56 million shares he held before this latest sale. He had previously sold a block of 12 million shares in December 2006 in order to lock in a loss for tax purposes, but then he repurchased those shares earlier this year for a lower price.
His offer for MGM Mirage shares would cost about $825 million, or about $364 million more than the amount he liquidated from his GM share sale. So there was a risk that he could be weighing further GM share sales, which could hit its value.
GM shares have already fallen ahead of the Kerkorian filing on GM, owing to concerns about what his offer for MGM Mirage would mean for his holdings in the automaker. They briefly regained some of their lost ground on news he was still holding onto 7.4 percent of GM shares for the time being, before again sinking lower.
Earlier this year Kerkorian sought permission to add to his 9.9 percent stake in GM. But even as he sought to buy shares above that threshold, he battled with management of GM, pushing it to join an alliance with Japanese automaker Nissan and French automaker Renault, which already have cross-ownership of each other's shares.
But after holding almost three months of talks, GM management pulled out of the discussions, saying the automaker would have to be compensated for joining such an alliance. The move brought criticism from Kerkorian and a resignation of his adviser, Jerry York, from the GM board.
Kerkorian already holds 56.3 percent of the shares of MGM Mirage, the No. 2 gaming company behind Harrah's Entertainment (Charts). His proposed purchase would increase that stake by an additional 5.3 percent.
MGM Mirage briefly moved into the No. 1 spot with its $7.9 billion purchase of Mandalay Resort Group in April 2005, but Harrah's responded with its own purchase of Caesars Entertainment in June of that year. Also in 2005 Kerkorian sold control of Metro-Goldwyn-Mayer movie studio to a group led by Sony.
Those efforts have helped the stock surge about 69 percent so far this year, making it one of the best-performing stocks in the S&P 500 in 2006.
Since hitting a 52-week high in late October, GM shares have pulled back almost 15 percent.
Despite the recent decline, GM stock still has outpaced rivals Ford (Charts) and DaimlerChrysler (Charts) this year, but it has continued to lose ground to overseas competitors such as Toyota Motor. (Charts)
Earlier in the day GM confirmed a report in the Detroit News that it was dropping plans to develop a new family of minivans because of a shift in product strategy that has the automaker putting more attention on the so-called crossover segment, which are SUV-like vehicles built on a car platform rather than a light truck platform.
Industrywide U.S. minivan sales have fallen 12 percent this year in the face of high gasoline prices and growing popularity of crossover models. Ford had previously announced it also would not develop future minivan models as it seeks to stem losses.
GM had been only a minor player in the segment. Vehicle sales tracker Autodata estimates that GM's share of the shrinking minivan market has fallen to just below 10 percent the first 10 months of this year, compared to 14 percent in the same period a year earlier.
--CNNMoney.com's Grace Wong contributed to this story.