A move by Tracinda Corp to trim its stake in MGM Resorts International (NYSE:MGM) is already fuelling debate about the stock’s long term performance. Regulatory filings indicate that the firm sold 10 million shares of the company stock, at a price of $32.75. After a 52% run over the past year, the stock appears to be losing momentum after struggling to close above the $34 a share mark on three attempts.
Institutional Holding
Since July, the stock has been in consolidation mode trading between the $30.5 a share mark and the $34 a share mark. According to Deutsche Bank analyst, Carlo Santarelli, the stock is showing signs of maturation as a good number of bullish catalysts are already priced in the share price. The analyst has since downgraded the stock to a ‘hold’ from a ‘buy’ and expects it to remain range bound.
Tracinda Corp trimming its stakes in MGM Resorts from 57.21 million shares to 47.23 million shares is another indication of waning investors’ confidence. However, the firm has sought to dispel emerging concerns by reiterating that the stock is still a good long term investment.
Vanguard is another hedge fund that remains long on MGM Resorts. The firm holds 41.2 million shares worth $1.29 million. Price T Rowe is the third largest investor in the international holding company with stakes worth 35.99 million shares.
Potential Catalysts
It is not all negative for MGM Resorts given the recent sell off of the stock. Rating firm Moody’s maintains a positive outlook on the stock with a Ba3 Corporate Family Rating. The rating takes into consideration a limited amount of the company’s secured debt.
MGM Resort has already reached an agreement to sell MGM National Harbor to MGM Growth Properties LLC (NYSE:MGP). The transaction if complete will inject $1.88 billion into the company’s balance sheet that can be used to trim debt holdings.
MGM Resorts has also announced a $1 billion share repurchase program which underscores its commitment to growing shareholder value.
Our new share repurchase program, along with the initiation of our quarterly dividend earlier this year, clearly highlights the board and management team's firm belief in our strategic plan,” said CEO Jim Murren.
