Kerkorian Move Sinks MGM Shares

Billionaire Kirk Kerkorian is keeping the lion’s share of Metro-Goldwyn-Mayer Inc.’s stock, but he’s cutting his stake by 10%.

The investor is selling shares in the Santa Monica-based studio to recoup taxes on other stock gains. The move, disclosed Tuesday, sent MGM shares plunging by nearly 20%, as they fell $2.61 to $11.40 in New York Stock Exchange trading. The thinly traded shares have traded as high as $20.92 in the last year.

In a Securities and Exchange Commission filing, Kerkorian’s Tracinda Corp. said it is eligible for a tax refund if it takes a capital loss on the MGM shares before Tracinda’s fiscal year ends Jan. 31.

Kerkorian is known to have paid significant taxes on gains he made holding DaimlerChrysler stock. The sale of the MGM shares at a loss is believed to be aimed at recovering some of that money.

Kerkorian plans to sell as many as 28.75 million shares -- 25 million to the public and 3.75 million allotted underwriter Bear, Stearns & Co. -- which would reduce his stake to 67% from 77%.

A Tracinda spokesman said the stock sale is strictly tax related and does not reflect any loss of confidence by Kerkorian in MGM.

Analyst Jeffrey Logsdon of Gerard Klauer Mattison said, “It’s hard to make much more of it than that. If there were something else, he’d probably have to disclose it to the SEC.”

Kerkorian has explored selling MGM in the past, but is known to value the company much higher than the stock market does now.

Also in its filing the entertainment company estimated fourth-quarter results on the high end of Wall Street expectations because of strong home-video sales and box-office revenue from the James Bond film “Die Another Day.”

MGM, which will announce its earnings Feb. 5, said it expects fourth-quarter revenue to rise about 65% to as much as $620 million, with net income as much as $60 million, or 24 cents a share, including a $30-million gain from the sale to NBC of its 20% stake in the Bravo cable network and an additional $13.2 million in an insurance settlement.

For the year, however, MGM expects a loss of about $145 million because of losses in earlier quarters. Separately, MGM disclosed that it has renewed an international distribution deal with NBC for four years.