Kerkorian sanctioned over sale
SEC: He misled market on GM stake
BY JUSTIN HYDE – FREE PRESS WASHINGTON STAFF – September 4, 2008
WASHINGTON — The U.S. Securities and Exchange Commission sanctioned
billionaire investor Kirk Kerkorian on Wednesday over his sale of
General Motors Corp. stock in 2006, saying he misled the stock market
about his attempts to unwind his stake.
As part of a settlement with the SEC, Kerkorian’s firm, Tracinda,
vowed to not violate SEC rules in the future. It also admitted no
wrongdoing.
The settlement pulls back the curtain on some of the moves the
reclusive Kerkorian made with his GM stake, which eventually grew to
9.9% of the company’s shares.
Kerkorian and adviser Jerry York used the position to press GM for
some kind of broad alliance with Renault-Nissan, an idea that GM
Chairman Rick Wagoner and GM’s board eventually rejected.
According to the SEC, an unnamed adviser to Kerkorian told him in
February 2005 that investing in GM was a "no-brainer." Tracinda began
buying shares, ending up with 56 million by October 2005 — setting up
a power clash at the top of GM with Wagoner, who favored his
turnaround plans over the more radical moves proffered by Kerkorian
and York.
After several months of talks, GM rejected the proposed Nissan-Renault
alliance a year later, and Kerkorian decided to winnow his stake. The
SEC said that Kerkorian decided to sell 28 million GM shares on
Nov. 20, 2006, but sold just 14 million shares for $462 million after
rejecting a price for all 28 million as too low.
While Kerkorian still wanted to sell his shares, Tracinda said in an
SEC filing that, based on business conditions, it could still "acquire
or dispose of additional shares."
By the end of the month, Kerkorian had unloaded the rest of his GM
stake. Word of the sale drove down GM’s share price 4.6% on the day
Tracinda filed with the SEC. GM’s shares now trade at less than half
the price they did when Kerkorian sold out.
The SEC said that in addition to not revealing its attempt to sell 28
million shares at once, Tracinda’s statement misled the market
"because there was only a remote possibility that it would purchase
any GM stock at that time."
Kerkorian, who holds a 6.4% stake in Ford Motor Co., also filed
several documents with the SEC on Wednesday, outlining his agreements
with York, adviser Alex Yemenidjian and a California law firm. Each is
entitled to 2% of any gains Kerkorian makes from his Ford shares.
In May, Kerkorian said through Tracinda that he did not want to buy or
control Ford at the time, although he might propose business
strategies andhas explored a possible capital infusion.
Contact JUSTIN HYDE at 202-906-8204 or [email protected]
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