NEW YORK — Ten days after taking a Blockbuster of a pounding, Viacom Inc. finally began to recover Thursday on wild — and untrue — rumors that MGM’s half-owner, Kirk Kerkorian, was buying its stock.
Viacom stock jumped $2.12 to close at $28.87 on heavy volume of almost 3 million shares, five times the usual volume, largely on institutional buying prompted by heavy marketing by Wall Street firms such as UBS Securities, Wall Street sources said. Viacom declined comment on the stock move.
Ironically, the belated recovery occurred despite a down day in the broader market, when the Dow Jones Industrial Average fell 32.54 points to 6,976.48. The market and Viacom moved in reverse over the past 10 days, with the Dow rising about 5% and Viacom falling 14% to a low Monday of $25.37, prompted by the company’s disclosure of Blockbuster CEO Bill Fields’ resignation and warnings that the video chain would report worse-than-expected earnings for the first quarter.
Thursday’s surge in volume and price gave rise to talk that Kerkorian was buying, Wall Streeters said. One rumor even had it that the billionaire was mounting a hostile raid on the company — an unlikely undertaking given Viacom chairman Sumner Redstone’s 28% voting control.
But the rumor of Kerkorian’s buying made some sense, as Kerkorian emerged in the summer of 1994 to buy 5% of Viacom stock, at a time when it was weak — around its current level — and helped it start a recovery that eventually took it to a high of $54 in the fall of 1995.
But a spokesman for Kerkorian’s Tracinda denied the investor was buying stock Thursday. He also said Kerkorian sold his Viacom stock “a long time ago” — as the stock was rising to its 1995 peak.
The Tracinda spokesman pointed out that Kerkorian now is putting his money into MGM. Not only did he buy half of the studio last year in a joint venture with Australia’s Seven Network, he is putting up another $340 million to help finance MGM’s purchase of Orion Pictures.
The more mundane explanation of Viacom’s sudden rise is that numerous Wall Street analysts who have been promoting the stock in the past week are finally being heard by institutional investors, many of whom have been out of Viacom for the past year.
Some of those may have been influenced by money manager Mario Gabelli’s presence in the market. Gabelli, a longtime Viacom holder, lifted his stake in Viacom’s class A (voting) shares from 6.1% to 7.3% last week, he said in SEC filings this week.
UBS Securities analyst Ed Hatch has been heavily promoting Viacom stock in recent days to the firm’s clients, which had some effect, Wall Streeters said. Hatch declined comment on UBS’ market activities but he said the stock sell-off meant “that some of the parts (of Viacom) are worth more than the whole.” He estimates Viacom shares to be worth at least $33.