Kerkorian adds 18 million shares to his portfolio

Thursday, June 9, 2005 | 9:33 a.m.

Billionaire investor Kirk Kerkorian fell short of his plan to buy 28 million shares in ailing General Motors.

But he still managed to add 18 million shares to his holdings, making his investment firm, Tracinda, the third-largest GM shareholder.

Analysts say Kerkorian's offering price was too little for some shareholders. Kerkorian paid $31 a share, higher than GM's recent low of $24.67 but still far below its 52-week high of $48.27.

"There are probably a great deal of investors who own shares at more than $31," says Kevin Tynan, an analyst at Argus Research. "I would imagine there are a whole bunch of shareholders who are under water at this point."

Shareholders' hesitance to give Kerkorian, who is famous for investing in troubled companies and attempting to turn them around, control of their stock may point to confidence that GM will turn things around.

GM posted a $1.1 billion loss in the first quarter. North American operations alone lost $1.3 billion. It has refused to provide earnings guidance for the rest of the year. At its annual meeting Tuesday, it said it plans to cut 25,000 jobs by 2008, close plants and is exploring selling all or part of GMAC, its profitable financing arm.

The holdback on selling to Kerkorian "indicates support among investors for GM stock, and that they believe there's further restructuring potential," says Bernstein analyst Brian Johnson. They "clearly think that in the next year, (the stock) could potentially go higher." GM shares closed Wednesday up $1.29, more than 4 percent, to $32.02.