MGM Stock Roars Past Short Sellers

When it comes to short sellers, the Lion isn't taking it lying down.

For two weeks, Hollywood studio Metro-Goldwyn-Mayer has been embroiled in a war with short sellers, traders who bet that a stock will fall in price.

The company has taken several actions that bedeviled short sellers by driving up the price of MGM stock. Though MGM executives say squeezing the "shorts" was unintentional, few short sellers believe them.

"We did it because we are very shareholder-friendly. We didn't do it because we wanted to squeeze the 'shorts.' In the process, they may have been hurt badly, but it's a side effect. We don't spend our time trying to figure out how to squeeze the 'shorts,' " MGM Chairman Alex Yemenidjian said.

Nonetheless, Kirk Kerkorian, who controls the company, and longtime lieutenant Yemenidjian have a strong dislike for short sellers, who often bad-mouth stocks to other investors and the media in hopes of driving down prices. MGM has been a favorite target of short sellers lately.

Kerkorian, one of the nation's wealthiest individuals, and Yemenidjian have a history of battling short sellers and taking action, such as stock buybacks at Kerkorian's MGM Grand gaming company, that ended up squeezing the shorts.

"I would have thought that the 'shorts' would have learned their lesson with MGM Grand and heavily shorting a company in which the principal shareholder can take the entire company private at a premium from petty cash at a moment's notice. Does somebody have a death wish?" Yemenidjian said in an interview Thursday.

In a short sale, a trader borrows stock and sells it, hoping to repay the loan later with shares purchased at a much cheaper price. Short sellers target stocks they believe are overvalued, for whatever reason.

Yemenidjian said short sellers are spreading misinformation about MGM's businesses and how much cash operations generate. He said MGM plans to ultimately win the battle through "a great performance by the company."

Tensions were exacerbated this week by a phony Internet posting, which MGM suspects was planted by a short seller. In that message, someone posing as former studio chief Frank G. Mancuso, who remains a consultant, advised people to sell their shares. MGM quickly posted its own message saying that the alleged Mancuso message was a fraud.