MGM Stock Gets Boost as Kerkorian Eyes More Shares

Posted on: March 18, 2013, 05:21h. 

Last updated on: March 19, 2013, 08:32h.

Gaming news is like a dizzying ping pong match these days: one day it’s all doom and gloom (Atlantic City’s revenue slump) and the next its butterflies and roses (Genting building on the old Echelon site). Get ready to whip your head to the left yet again; 95-yr-old Kirk Kerkorian’s private investment arm, L.A.-based Tracinda Corp., is looking into bumping its MGM Resorts International shares from 18.6 percent up to 25 percent. The news certainly has given MGM stock a shot in the arm; its stock price closed at $13.25 on the New York Stock Exchange following the rumored increase, and closed up .84 cents a share (6.77 percent) with nearly five times the normal volume on trades.

A Definite Maybe

The hubbub was created when Tracinda stated in a recent Securities and Exchange Commission (SEC) filing that it might make the aforementioned increase in shares.

“It is not definite that additional shares would be purchased,” said RBC Capital Markets gaming analyst John Kempf, speaking to investors recently. “However, in our view, there would be no need to make this filing unless there was interest in [the company] increasing its position.”

Turning It Around

Ironically, it was only just over a year ago that Tracinda let go of 20 million shares of MGM Resorts stock for $268 million, and a year before that, Kerkorian himself said that Tracinda might divest itself of its MGM shares altogether.

Currently, Tracinda holds close to 91.2 million shares in MGM Resorts International, which operates ten premier Strip casino hotels, including the MGM Grand, Bellagio and The Mirage. Tracinda also has a 50 percent stake in the CityCenter development on the Strip. It also is majority owner of the MGM Grand Macau and has a second property going up in the Cotai Strip region there.

MGM Says “No Comment”

Declining to comment on the possibility of the Tracinda purchase, MGM is feeling somewhat giddy with their own expansion plans these days. In addition to looking at  new properties in Massachusetts, Maryland and Toronto, MGM Resorts expects a dividend payment of $255 million for its 51 percent stake in MGM China, which is being publicly traded on the Hong Kong Exchange.

MGM Resorts Chairman Jim Murren has said the company might even consider selling one or more of its Las Vegas properties, and others as well, should the numbers make sense.

“We remain positive on MGM, as we continue to believe the company has several levers, particularly through its capital structure, to drive further increases in its stock price,” said analyst Kempf.