You gotta give action to get action.

Casino tycoon Kirk Kerkorian doubled-down on

General Motors

(GM) - Get Report

Wednesday, offering to buy 5% of the automaker's outstanding shares for $31 apiece. The above-market bid sparked a rally in both GM and the broader market, sending the

Dow

up 128 points.

GM shares, beaten down by a mid-March profit warning and concerns about its debt rating, closed up $5.03, or 18%, to $32.80 in heavy volume. The shares have been steadily rising since ending Friday at $26.68, despite a report that its April U.S. auto sales dropped 7.4%.

Kerkorian, through his

Tracinda Corp.

, is offering cash for up to 28 million GM shares. He already owns 22 million shares of General Motors, or about 3.9% of the company's float -- a stake that appreciated by about $110 million Wednesday.

If the roughly $870 million tender was fully subscribed, Kerkorian would own 8.8% of GM. The Las Vegas billionaire described his stake as being for investor purposes.

In a post-close release, GM noted Kerkorian's bid but said little else.

"GM typically does not express a view on specific investor activity," the company said. "GM's board and management are committed to enhancing shareholder value for all of our investors."

Calyon Securities analyst Joseph Amaturo upgraded the stock from sell to add following word of Kerkorian's plans.

"We believe the news flow for GM stock will move from extremely negative to positive as we expect Tracinda's roughly 9% stake in the company

after the offer will give Kerkorian a 'license' to put pressure on management and/or the

United Auto Workers at some point down the road," Amaturo wrote in a recent research note. "We believe that Tracinda could be the catalyst needed to drum up major structural changes at GM as well as the entire auto industry."

Other analysts suggested that a restructuring could be in store for the company, and Kerkorian's investment could play a role in pushing those through.

"There is no doubt in our mind that Tracinda's interest is not in the auto business, but rather in unlocking value embedded in non-core businesses, including GMAC's non-auto subsidiaries," wrote Merrill Lynch analyst John Casesa. He upgraded GM to neutral on the news.

Kerkorian's plans for GM raised questions about whether he was interested in mounting a takeover attempt for the company, particularly in light of the string of buyouts that have erupted in public markets of late.

He controls

MGM Mirage

(MGM) - Get Report

and is one of the most successful casino investors in the world, but Kerkorian has had less success with his forays into automobiles.

The 88-year-old California native is currently trying to appeal the defeat of his lawsuit claiming he was fleeced in the 1998 merger of

Daimler Benz

and Chrysler, of which he was the largest shareholder at the time.

In 1995, Kerkorian and Lee Iacocca offered to buy Chrysler for about $21 billion. The bid was dropped after the then-No. 3 automaker agreed to raise its dividend and buy back billions of dollars in shares.

In this case, Tracinda said its intention was to remain a passive investor, but observers had their doubts.

"I don't think Kerkorian will try to take over the entire company, but I think he will become a very active and vocal shareholder, as he has in the past," said Brian Johnson, analyst with Sanford Bernstein."

Johnson said GM could greatly improve its cost base by removing excess capacity. If the company cut 20,000 blue-collar workers, he said, the company could free up about $2 billion in costs. That could allow it to realign product lines in certain factories and trim down its white-collar bureaucracy by 500,000 to 700,000. Also, he said moving to the U.S. large corporate standard on retiree health co-pay could save over $1 billion a year.

Kerkorian's tender offer is a godsend for investors of GM, who have seen the value of their shares nearly halved over the last 18 months. The most recent rout occurred after GM lowered its profit forecast on March 15, saying that stiff competition and high health care and pension costs would make it hard for the company to produce any cash flow in 2005.

GM's long-term debt is currently poised just above junk status at the three main credit agencies and has long traded at junk-like spreads to Treasury bonds. The company reported a billion-dollar quarterly loss last month.

Considering all the problems, Argus Research analyst Kevin Tynan cautioned investors about getting too optimistic in light of Kerkorian's interest.

"People hearing his name and buying those shares think automatically that he knows something nobody else knows, but the guy has made at least one mistake before," Tynan said. "So, just because the guy is involved doesn't mean this is a much better investment all of a sudden."