Sloan Sessions: Kerkorian’s GM sell-off

Bob Moon Dec 4, 2006
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Sloan Sessions: Kerkorian’s GM sell-off

Bob Moon Dec 4, 2006
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TEXT OF INTERVIEW

BOB MOON: Can you imagine trying to unload all 28 million of your shares in General Motors and trying not to call attention to that massive stock trade? That was one of the problems billionaire investor Kirk Kerkorian had at the end of last week. He bailed out of his GM investment to the tune of around $800 million dollars and apparently was still able to walk away with a modest profit. I asked Newsweek magazine’s Wall Street editor Alan Sloan how Kerkorian was able to exit so gracefully.

ALLAN SLOAN: You know, the amazing thing is he had roughly $1.7 billion of General Motors stock, you know it was 10 percent of the company, and he managed to unload all of it within a matter of days without really driving down the price. I mean, here’s one of the smartest people, one of the great legendary investors who buys into Detroit 18 months ago when nobody wants it and he buys and sells and ends up basically treading water.

MOON: Well what does this mean to GM in the future? Because his involvement really did help lift GM shares initially.

SLOAN: I’m sure at GM that they’re probably doing celebrations that he’s gone, because his associate Jerry York really woke up General Motors and really scared then and I’m sure the guys at General Motors were thrilled when York left the board and wasn’t there and they didn’t have to deal with him. And I’m sure they’re doing handsprings because York and Kirk are gone. I’m sure they’re thrilled.

MOON: Well does it keep up the pressure in terms of the stock value though? Of trying to keep that up?

SLOAN: Well this is not gonna be good for the stock price. I expected the rice to fall apart after these sales but it hasn’t, which shows how much I know. It also shows why it’s good that I’m not a professional investor but here’s one of the smartest people who came in, saw a lot of opportunity or so he thought, and he’s taking his money off the table and is just walking away from it rather than hanging in and that tells you something. It tells you that Kirk, while he’s almost 90 and has one of the longest time horizons of anybody, is not a man of infinite patience.

MOON: So what did he hope to gain with this exercise?

SLOAN: He hope to make a lot of money. I mean this is why you do this. He hoped to make a lot of money, because he made billions of dollars, he did something similar at Chrysler but stayed on and in the end forced the company to get sold and made billions of dollars. But I think what happened here is, he and York felt when they started doing this 18 months ago, that GM stock was very cheap relative to its assets, that the company had the potential to turn around and make a lot of money, and in the end he couldn’t change General Motors enough to do what he thought they should do, and he wasn’t making any money and he said ‘the hell with this’ and he pulled the plug on it. I mean it’s very mature on his part.

MOON: Allan Sloan, thanks for joining us.

SLOAN: Bob, it’s been my pleasure.

MOON: Allan Sloan is Wall Street editor for Newsweek Magazine. In Los Angeles, I’m Bob Moon. Thanks for joining us.

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