(MGM article updated with downgrade and stock movement.)
NEW YORK (
equity offering was not enough to calm investors, overshadowed by yet another quarterly loss.
Shares of MGM are tumbling 9.2% to $12.36 in morning trading, after trading was briefly halted this morning following the company's offering of nearly 10% of its outstandshing shares at $12.65 each, below Tuesday's closing price.
MGM reported that it will sell at least 68.7 million shares, which will help it address 2011 and 2012 debt refinancing needs. J.P. Morgan analyst Joseph Greff expects the sale will result in about $500 million in new equity capital.
Tracinda, run by Kirk Kerkorian, will sell 27.8 million shares, while MGM will sell at least 40.9 million. This will leave Tracinda with about a 30% stake in the company.
Analysts voiced surprise that MGM did not plan to sell more shares, with Greff saying he predicted a larger amount of about $1 billion to $2 billion, in an effort to reduce leverage.
"Given the company's $12.9 billion debt load, combined with our lack of visibility for a true consumer rebound, as well as the upcoming increase in room capacity in Las Vegas with the opening of Cosmopolitan in December of this year, we would have preferred to see a larger equity raise," Bain wrote.
Others fear the stock offering will dilute MGM's stock.
MGM also said it expects to report a loss of 72 cents a share in its third-quarter, weighed down by a $357 impairment charge related to its CityCenter investment.
Investors felt a jolt of optimism for a recovery of the Las Vegas Strip on Friday, based on significantly improved August gaming revenue. At the time, MGM's stock rose about 16%. But that run-up may have been premature.
Wells Fargo analyst Carlo Santarelli says these preliminary numbers do not indicate much of anything has changed.
Soleil Securities cut its rating on the stock to hold from buy.
The company plans to take $125 million from its balance sheet of its Macau asset, which could slightly weak its potential Hong Kong initial public offering, Sterne Agee analyst David Bain, wrote in a note.
MGM also announced that it received a bid for its 50% stake in the Borgata. The company did not disclose the bidder for Borgata, but said the offer equals about $250 million for its 50% interest. The company jointly owns the Atlantic City casino with
Since this is less than MGM's carrying value of its investment in Borgata, the company expects to incur a pre-tax impairment charge of about $128 million in its third quarter.
--Written by Jeanine Poggi in New York.
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