Kerkorian's rate of return on General Motors (GM): 4.26%

According to this article from 10/12/06 by Nat Worden at TheStreet.com, Kirk Kerkorian's Tracinda Corp. purchased most of it's 9.9% stake in General Motors (GM) in May of 2005 for $31 a share. We'll assume this was 5/31/05.

Today is the 11/22/06, 540 days later. Kerkorian sold 14 million shares of GM to a private party for $33 a share - a total of $462MM. If he paid $31 a share for that big chunk, it cost him $434MM. That's a total return of 6.45% over a period of just about 1.5 years. Annualized, this works out to 4.26% - a VERY poor return considering this doesn't include transaction costs (like placing an employee on the board or buying the shares). Kerkorian could have easily done better by buying US Treasury bonds.

This brings up the point - what is Kerkorian doing? Is he planning on exiting General Motors altogether? With fewer shares, he has less voting power, and is thus less able to fight it out with management. Yet, he still currently has a significant stake in General Motors of over 42 million shares.

The news of the sale hit GM shares hard, ending the day down 4.66% at $31.09. Just a few days ago on 11/17/06 it closed at $35.37. A 14% slide in only 3 trading days is pretty severe, but I'm of the opinion that the worst is still to come.