NEW YORK — Kirk Kerkorian spent $25 million to support Metro-Goldwyn-Mayer Inc.’s weak stock price in its first three days of trading, increasing his stake in the Lion by 1.8% to 63.2%, Kerkorian said in an Securities & Exchange Commission filing late Tuesday.
The filing confirms widespread rumors on Wall Street that Kerkorian or one of the underwriters to MGM’s public offering was behind buying that began late in the day on Thursday, when MGM stock first began trading (Daily Variety, Nov. 14).
It also highlights how much money Kerkorian is committing to MGM. With the latest $25 million investment included, Kerkorian has now put $971 million into MGM.
That figure includes a $75 million commitment he made early last week, before the offering was priced, to enable the Lion to reduce the size of the public offering to 9 million shares from the original size of 12.5 million. Kerkorian bought the extra 3.5 million shares.
The offering was priced at $20 on Wednesday, Nov. 12. But when trading opened Thursday, the stock fell and traded as low as $19 until a buyer stepped in just before 3 p.m. with an order for 400,000 shares at $20. The SEC filing revealed that buyer to be Kerkorian.
Kerkorian bought more stock that afternoon and pushed MGM’s stock price to a closing price of $21, enabling MGM’s backers to claim the offering a success.
MGM’s stock price has continued to be weak, slipping below $20 both Friday and Monday. Kerkorian continued buying, the filing revealed, acquiring a total of 1.2 million shares over the three days for $24.6 million plus commissions of $48,000.
The filing revealed Kerkorian paid for the stock with money borrowed from Bank of America National Trust and Savings Assn. under a credit line set up when Kerkorian bought into MGM in October of last year. The filing did not say how big the credit line is.
It is not known whether Kerkorian was in the market Tuesday, although MGM’s price closed down 12¢ to $19.93. A spokesman for Tracinda declined comment on the purchases, citing securities restrictions still in effect.
Wall Streeters were stunned by Kerkorian’s filing. “Why didn’t he just buy the entire 12.5 million shares, rather than selling 9 million to the public, paying an underwriter and now paying commissions to buy the stock on the market?” said one investment banker.
People close to MGM, however, have argued that Kerkorian’s buying is an indication of his confidence in the company. Indeed, while most media investors avoided the offering, Wall Streeters say investors who have made money with Kerkorian in his ventures in Chrysler and in Las Vegas may have followed Kerkorian into the offering.