MGM shareholders jump at chance to sell back stock

MGM Grand Inc. stock dropped today after the company announced its stock buyback offer generated heavy selling by minority shareholders.

Analysts said MGM stock fell 2 1/8, to 31 1/16 a share, in mid-morning trading because of mixed signals over the company's future plans. MGM Grand was trading at more than double its usual volume.

In the midst of the tender offer, the analysts said, MGM executives were suggesting that minority shareholders -- rather than tender into the $35 a share offer -- might want to wait for subsequent tender offers.

But the fact so many minority shareholders jumped at the chance to sell their holdings now rather than wait for another offer indicated they are bearish about the future and didn't want to gamble on another offer that might not materialize.

Shares of Las Vegas casino companies have fallen sharply in recently months on concerns about overbuilding here and competition elsewhere. MGM stock was languishing in the mid-20s until it announced its offer to repurchase stock at $35 a share July 2. Since then, it's traded above $31.

MGM said today holders of more than 15.7 million shares tendered into its offer to buy back 6 million shares. As a result, the company said it will buy back 6 million shares on a pro rata basis, meaning it will accept about 38.1 percent of the shares each holder tendered.

The number tendered represents more than 72 percent of the 21.8 million shares not owned by Kirk Kerkorian, who holds 36.25 million, or 62.5 percent, of the company's 58 million outstanding shares.

The repurchase of 6 million shares will boost Kerkorian's stake in MGM Grand to 69.7 percent from 62.5 percent -- and it may go higher.

MGM also announced that it, as well as Kerkorian and his holding company, Tracinda Corp., may buy additional stock on the open market.

When it announced the tender offer a month ago, MGM said it might expand the buyback program to 12 million shares. It indicated today it may still do so, though it didn't extend the $35-a-share offer.

MGM said today that, "depending on market conditions, the remaining 6 million shares in the repurchase program may be acquired in the open market, in private transactions, through a tender offer or offers, or otherwise," either by the company or Kerkorian.

MGM officials couldn't be reached for comment this morning.

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