MGM majority shareholder Kirk Kerkorian, who recently orchestrated a discounted stock offering that had the effect of greatly depressing the Lion’s share value, Tuesday signaled plans to purchase up to 10 million additional shares. Studio’s share price is hovering near historic lows.
The discounted offering, which increased MGM’s public float when executed in March, lowered the reclusive billionaire’s stake to 77% from 81%. If he now buys 10 million new shares, that would restore Kerkorian’s stake to 81%.
It also would lower the average per-share cost at which he accumulated that massive hold on the legendary studio, his third ownership stint at MGM.
Before the latest looming buying spree — signaled in a news release from his investment vehicle Tracinda — Kerkorian had spent about $3 billion, or roughly $15-$16 a share, to accumulate 194.3 million shares of MGM common stock. With MGM shares recently trading below $11, Kerkorian is sure to reduce the average cost of acquiring his holdings once he’s binged on the cheaply priced additional shares.
However, should Kerkorian ever decide to sell some or all of his Lion holdings, he would likely pencil in a slightly higher per-share cost than indicated by simple accumulation costs. That’s because high-finance investors also account for “carrying costs” on their investments, or in this case the cost of Kerkorian’s keeping his billions tied up in MGM stock.
Tracinda said MGM stock buys “may be made from time to time in the open market through block trades or otherwise.” An MGM spokeswoman declined comment on the Tracinda announcement.
MGM shares were up 21¢ Tuesday to $11.10.