Tuesday, 30 December 2008

Buying low, selling lower!

Kerkorian sells off Ford shares at deep loss

Reuters – Billionaire investor Kirk Kerkorian leaves the Roybal Federal Building in Los Angeles August 20, 2008. …

DETROIT (Reuters) – Billionaire investor Kirk Kerkorian has sold off all of his remaining shares of Ford Motor Co, completing a retreat from a high-profile stake in the No. 2 U.S. automaker that cost him hundreds of millions of dollars.
A spokeswoman for Kerkorian's investment firm, Tracinda Corp, said that the firm's remaining Ford shares had been sold. A spokesman for Ford had no comment on the development.
Tracinda, which briefly ranked as Ford's largest outside investor, said in a regulatory filing in October that it had begun working with bankers to sell the 133.5 million shares of the No. 2 U.S. automaker it still held at that time.
It was not immediately clear when Tracinda had completed those remaining sales of Ford stock over the past two months.
The pullout from Ford by Kerkorian caps a two-year period during which the activist investor took a run at all three Detroit-based car companies as they struggled to restructure.
Kerkorian, 91, previously held a nearly 10 percent stake in General Motors Corp and made a failed bid for Chrysler LLC last year.
Since October, he has been cutting his losses on a $1 billion investment in Ford that had lost most of its value.
It was not immediately clear how deep Kerkorian's losses on the Ford investment were. But even if Tracinda sold all its remaining shares at the recent high for Ford stock, the firm would have been facing a loss of some $475 million based on its average acquisition cost for the shares.
If the firm had sold out at the bottom of the market for Ford stock in November, it would have lost more than $800 million.
Kerkorian surprised analysts and investors in April when he began buying Ford shares and spent more than $1 billion to take a stake in the automaker at an average price per share of $7.10.
At the peak of his investment, Kerkorian held a 6.5 percent stake in Ford. In June, he had also offered to support the automaker's turnaround efforts with an infusion of additional capital.
Ford has been widely considered to be the best-positioned of the three Detroit automakers at a time when all three have been hit hard by declining sales and tight credit.
When GM and Chrysler negotiated $17.4 billion of emergency loans from the U.S. government earlier this month, Ford held back, saying it expected to be able to weather the downturn on its own.
But conditions across the auto industry have taken a dramatic turn for the worse since September when credit suddenly tightened for both car shoppers and dealers.
In late October, Tracinda began selling Ford shares at $2.43, representing a loss of almost 66 percent from what the fund paid on average.
Since then, Ford's shares have traded between a low of $1.02 in November and a high of $3.54 earlier this month.
Ford shares closed down 3 percent on Monday to end the New York trading day at $2.22.
The Ford family holds slightly less than 3 percent of the automaker's shares but controls 40 percent of the voting power through a separate class of shares.
Kerkorian's offer of additional capital for Ford had been seen as an endorsement of the company's strategy and management under Chief Executive Alan Mulally.
But Kerkorian's record as an activist investor had also raised questions earlier this year about whether his investment could be a threat to the Ford family's continued control of the automaker.
(Reporting by Kevin Krolicki; editing by Phil Berlowitz and Matthew Lewis).


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