Revised: Kerkorians TOTAL return on General Motors Co. = 3.93%

The news this morning was that Kirk Kerkorian, billionaire activist investor and owner of Tracinda Corp has sold his remaining stake in General Motors Co. (GM). A few days ago in this post, I figured that Kerkorian's average rate of annual return on the GM stock was 4.26% - but that was BEFORE he sold off a whole lot more stock.

From today's Wall Street Journal [$$]:

"The person familiar with the matter said Tracinda sold 28 million GM shares at $29.25 a share. The shares were sold to Bank of America, a key lender to Mr. Kerkorian. A sale of 28 million shares crossed market-data services yesterday afternoon, but it wasn't clear during trading that the seller was Tracinda.

Earlier yesterday, Tracinda said in an SEC filing that it had agreed to sell 14 million shares for $28.75 a share in a private transaction. Tracinda last week sold another 14 million shares in a private deal for $33 a share. Before the sales, it had held a 9.9% stake."


So we have three chunks:

1) 14 million shares @ $33.00 = $462.00MM
2) 14 million shares @ $28.75 = $402.50MM
3) 28 million shares @ $29.25 = $819.00MM

Combined, we have:

56 million shares sold for $1,683.50 = $30.0625

From the same article:

"Mr. Kerkorian's GM sales come at a point when the 89-year-old investor is ahead on his investment in the auto maker by less than $100 million, when dividends and gains from his recent stock sale are factored in. The gain represents a modest return on his $1.6 billion investment in the company, falling well short of the multibillion-dollar profits he has reaped in the auto industry in the past."

In my previous analysis, I did not factor in dividends because I did not know the precise amount of stock purchased by Kerkorian and on which dates. To guesstimate his total dividend receipts, lets say he averaged an 8.5% stake in GM between the end of May 2005 and today. This number I'm guesstimating based on the graph labelled "STUCK IN NEUTRAL" from an article in the Wall Street Journal on 11/24/06.

Yahoo Finance tells me there were the following dividends during that period: (There was another on May 17, 2005, but we'll assume he didn't hold it then.)

15-Nov-06 $ 0.25 Dividend
09-Aug-06 $ 0.25 Dividend
10-May-06 $ 0.25 Dividend
14-Feb-06 $ 0.25 Dividend
08-Nov-05 $ 0.50 Dividend
10-Aug-05 $ 0.50 Dividend

Total of $2 a share.

If GM has 565.61M shares outstanding, and Kerkorian possed an average of 8.5%, that means he had an average of 48 million shares x $2 a share = $96MM dollars. If his total gain was $100 Million including the dividends, he only made something like $4MM from share price appreciation.

$4MM / 56MM shares = $0.07 a share over a time span of 548 days (1.5 years)

This means his real average purchase price was more like $29.99 - not the $31 a share reported by Nat Worden at TheStreet.com on 10/12/06.

$29.99 x 56MM shares = $1,679.44MM initial investment
Return = $100MM
Return on investment = 5.95%
Annualized ROI = 3.93%

Obviously without exact dates and amounts, this is still just a guesstimate, but it shows just how badly things went for Kerkorian during this timespan. He could have easily beat a return of 3.93% with a multitude of less risky investments. I do admire his ability to take a swing at such a risk. He is obviously a wickedly smart guy. It's a shame things didn't work out for him, as his plans for GM may have been a smart move - now we'll never know.