Kerkorian saw narrow loss on GM trades

Billionaire investor lost about $8.6 million on stock trades but got $100 million in dividends.

By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Billionaire investor Kirk Kerkorian apparently lost about $8.6 million buying and selling GM over the past 19 months, although dividends from the troubled automaker allowed him to walk away with more than $100 million in cash from the investment.

The trading losses came in 2005, not this year, when GM (Charts) shares have been the best performer of the 30 stocks that make up the Dow Jones industrial average. Still, when all his trades of GM shares are compiled, Kerkorian ends up with a narrow trading loss since he started buying shares in April 2005.

Billionaire investor Kirk Kerkorian
Billionaire investor Kirk Kerkorian
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His sales of what had been a 9.9. percent stake in GM over the past two weeks were often done at below-market prices, and they helped send the stock into a downward spiral. Shares of GM were up about 1 percent in trading Monday, although they are still off 15 percent since the last day before Kerkorian started dumping shares.

Kerkorian's latest filing on his GM holdings Thursday said he had 28 million shares of GM left, or slightly less than a 5 percent stake in the automaker, after the second sale of 14 million shares in just longer than a week.

But the Bank of America (Charts), which had loaned Kerkorian about $243 million of the money he used to buy GM shares in 2005, confirmed Friday that it bought a block of 28 million shares late Thursday from an undisclosed buyer in a private transaction. That price was reported at $29.25 a share.

Assuming that price is correct and that Kerkorian is the seller, as has been reported by The Wall Street Journal and The New York Times, then his total sales of GM stock brought him $1.935 billion, after he paid a total of $1.944 billion for those shares, according to his filings with the Securities and Exchange Commission. That makes the $8.6 million trading loss essentially a break-even investment.

Kerkorian will have received a total $115.4 million in dividend payments from GM when he gets his final dividend payment on Dec. 9 for shareholders of record on Nov. 17. The $106.7 million net gain from dividends after trading losses comes to a 5.5 percent return on his $1.9 billion investment over the course of 20 months.

Jerry York, Kerkorian's key adviser on his GM holdings, had advocated in a speech in January that GM cut its dividend to 25 cents a quarter from 50 cents a quarter in order to conserve cash and to help it win concessions from workers. GM announced the dividend cut about a month later. The reduced dividend cost Kerkorian about $56 million this year.

Kerkorian at one point this year filed for permission to increase his holdings above the 9.9 percent stake he held, but he also battled with GM management, pushing it to join an alliance with Nissan (Charts) and Renault that would have included cross-ownership of shares with the Japanese and French automakers. GM management held talks with those automakers but rejected such a combination, which brought a new round of criticism from Kerkorian.

Soon after those talks ended, York resigned his position on the GM board, stating in his letter of resignation that he had, "grave reservations concerning the ability of the company's current business model to successfully compete with those of Asian producers."

Kerkorian's sale is seen as reducing some of the pressure on GM management, although it still faces challenges to stem losses on its auto operations, stop the loss of market share in its home market and win a new labor deal with the United Auto Workers union that allows it to be more competitive with overseas automakers who don't have the Big Three's cost structure.

While Kerkorian never owned more than 56 million shares of GM at any time, in December he sold 12 million of that 56 million stake at an average price of $20.96 a share in order to lock in losses for tax purposes. Those losses on the 2005 sales ranged from $60.7 million to $160.9 million, depending upon the original price of shares he sold at that time. In January he repurchased another 12 million shares, this time at an average price of $21.89.

GM, Ford Motor (Charts) and the Chrysler Group unit of DaimlerChrysler (Charts) are all losing money on their core North American automotive operations and have been losing U.S. market share to Japanese competitors such as Toyota Motor (Charts), as well as to Korean and some European automakers.

Cars 2006: Big flops, big surprises

Too soon for victory lap at GM Top of page

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-- Reuters contributed to this report

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.