Kerkorian Buys Another 6 Million Chrysler Shares
Investor Kirk Kerkorian maintained his 9.8% stake in Chrysler Corp. by purchasing another 6 million shares in the troubled auto maker in a new offering that was still expanding Wednesday to accommodate the demand.
Kerkorian, a passive investor in Chrysler since he startled the company last December with a purchase of 22 million shares, bought the extra shares for “investment purposes,” an aide said.
Although the Beverly Hills billionaire has so far taken a bath on his Chrysler venture, Kerkorian wasn’t alone in his continued willingness to gamble on a big turnaround or other happy outcome for the No. 3 U.S. auto maker.
Chrysler’s original planned offering of 33 million shares was expanded Tuesday to 35 million, making up for a lower-than-expected price of $10.125.
On Wednesday, the company granted options for another 5.25 million shares to underwriters Salomon Bros. Inc. and an overseas syndicate.
Sources said Wednesday that those options have already been exercised to meet demand signaled by investors. That would boost the new offering to 40.25 million shares, generating about $400 million for Chrysler, less fees and other costs of the sale.
Chrysler could not confirm that the options had been exercised. Officials at Salomon couldn’t be reached for comment Wednesday.
Chrysler stock closed up 12.5 cents to $10.25 Wednesday on volume of 11.3 million shares, making it the most active New York Stock Exchange issue.
Chrysler needs the money to shore up its balance sheet and boost the junk bond credit ratings plaguing its finance subsidiary.
The successful sale was an important step for Chrysler, whose latest financial woes have revived concerns about the firm’s long-term survival.
But those fears apparently were eased when Chrysler Chairman Lee A. Iacocca and other top executives took prototypes of several cars and trucks of the future on a tour of major U.S. and European financial centers. The tour culminated last week in New York.
“I was actually impressed with some of the forward products,” said David Garrity, an automotive analyst at Nomura Research Institute in New York. “This (money) should certainly give them some breathing space.”
Additional investment by Kerkorian’s private investment company, Tracinda Corp., was intended to keep his Chrysler holdings at about 9.8% of the total, said Alex Yemenidjian, a Tracinda executive.
Kerkorian’s original investment of $272 million, at an average of nearly $12.50 a share, shrank on paper by roughly 25% after Chrysler announced plans to issue new shares. That drove down the price because the additional shares will dilute the value of existing shares.
