Tuesday, October 12, 2010

Awesome! MGM Resorts (MGM) Announces Massive Equity Offering

MGM Resorts International Announces Common Stock Offering

MGM Resorts International (NYSE:MGM) announced today that it is offering 40,900,000 shares of its common stock and that its largest stockholder, Tracinda Corporation, is offering 27,782,000 shares of its common stock pursuant to an effective registration statement.  Barclays Capital Inc. is the sole underwriter.

MGM Resorts International and Tracinda Corporation will each grant the underwriter a 30-day option to purchase up to an additional 6,135,000 shares and 4,167,300 shares, respectively, to cover over-allotments, if any.

MGM Resorts International intends to use the net proceeds from the sale of the common stock for general corporate purposes, including the repayment of debt.  MGM Resorts International will not receive any proceeds from the sale of common stock by the selling stockholder. 
This is a massive offering ~ 79 million shares and over a billion dollars if the over-allotment options are exercised, which is about 16% of the current market capitalization.

I have long thought that MGM should (and would need to) issue equity in order to grapple with its upcoming debt maturities.

This is fantastic for our MGM short. It is an implicit admission by the company and Kerkorian (via Tracinda, the largest holder) that the current level is an attractive selling price.

No comments: