When Kirk Kerkorian bought stock in Ford a few months ago, shareholders and executives must have taken a sigh of relief. Now Kerkorian may not be Warren Buffet, but who wouldn’t be happy if a billionaire was confident enough to buy over 6 percent of your company. Of course, that kind of clout goes both ways. It’s great when those billionaires buy in, but worse when they start selling. And Kirk Kerkorian seems to want out of Ford.
Today, Kerkorian’s Tracinda Corp. announced a sale of 7.3 million shares of Ford stock. Tracinda still holds more than 130 million shares of Ford Motor Company, but it may sell those as well. And this isn’t the worst part for Ford. Yes, the news sent the stock down even more, and speculation is at an all-time high, but Ford may be losing a potential source of capital to survive the upcoming quarters. Kerkorian could have helped out in a cash-flow crunch, and that’s probably off the table now.
Most recently, Ford recorded nearly 9 billion dollars in losses, and currently has only $26 billion on hand. So, basically, that buys them 3 quarters to get their act together. And it might not be so easy to just borrow a few billion dollars in the future, even for the company that helped to build Detroit. The credit freeze has thawed a little, but banks may not be willing to take such a risk with a company that hasn’t recorded a profit in years.
Here’s more, from CNN Money:
- “Ford is losing one of its last-resort strategies - the ability to tap Kerkorian’s deep pockets to help with any future liquidity crises,” said Global Insight analyst Aaron Bragman. Were Ford’s liquidity position to fall to dangerously low levels, Kerkorian might have been able to offer up a few billion dollars to buy the company time, Bragman noted.
- News of Kerkorian’s exit, an indication he lost confidence in the company’s ability to recover, helped push Ford shares down 7.7% to $2.15 in recent trading. The stock had moved as low as $1.88 two weeks ago on heightened concern that Ford and its Detroit rivals could face liquidity pressure due to a deteriorating economic scenario and tightening credit conditions.
Read the full story here.
