Source: Activist Investor Daniel Loeb Buys MGM Stake (Exclusive)
UPDATED: The hedge fund manager -- who's asked Sony to spin off its entertainment assets, and successfully reshaped Yahoo's board -- has been buying shares of the company's private stock at a price up nearly 30 percent over the last month.
Activist investor Daniel S. Loeb, who last weekend sent Sony a letter urging a spinoff of its entertainment assets, has another Hollywood target -- Metro Goldwyn Mayer, a well-placed source has revealed to The Hollywood Reporter.
Loeb apparently has been acquiring shares on the private market in the closely held movie and TV company, most recently at a price of about $50 a share -- a 28 percent increase over the price a month ago of $39 a share. That, in turn, is about double what MGM traded for a year earlier, shortly after it came out of a pre-packaged bankruptcy.
Loeb had no comment, and it's unclear how many shares of MGM stock he's bought. MGM's private stock currently trades for $51 a share.
Loeb’s letter, hand-delivered to Sony management in Tokyo on Tuesday, sent that company's stock shooting up about 10 percent. Through the hedge fund Loeb founded, Third Point LLC, Loeb is Sony’s largest shareholder, with a stake in the company of about 6.5 percent.
Third Point also holds about a 5.3 percent stake in Yahoo! (although it has sold some shares this year) among other investments. In 2011 and 2012, Loeb's letters to Yahoo's board eventually led to the ouster of its CEO, Scott Thompson, and the hiring of Google's Marisa Mayer as CEO. Loeb also joined the board. His fund reportedly manages assets of $12.9 billion. Loeb, who grew up in L.A., is reportedly personally worth about $1.5 billion. Third Point backed Jay Penske's acquisition of Variety.
In addition to asking Sony to spin off its entertainment assets, Loeb also is seeking a spinoff of its financial services division. Sony’s official response is that they are always happy to have a “constructive dialog” with shareholders, but they have no plans for the spinoffs.
It is unclear why MGM’s private stock has popped so much recently, but the company is expected to report improved quarterly earnings Wednesday afternoon to investors and make them public the following day.
Those earnings are expected to be robust, as they will include more of the returns from the record-breaking releases of the James Bond movie Skyfall and especially The Hobbit: An Unexpected Journey. Some of that revenue was recorded in the first quarter, but because The Hobbit was released Dec. 14, much of that falls into this new reporting period. The DVD of The Hobbit dropped March 19.
The rapid rise in the value of the private stock is not believed to be just about the expected earnings. Most analysts already know about what to expect because of Hobbit revenue reported by Time Warner earlier this year. Warner Bros. distributed The Hobbit theatrically. Skyfall was distributed through Sony.
It doesn’t appear the new MGM will move forward with an IPO any time soon, but Wall Street sources are speculating they may be close to a large private placement, which would raise capital for operations and acquisitions without an SEC filling (since they are not a public company).
MGM’s biggest shareholder is Anchorage Capital Group LLC. Other major investors include Highland Capital Management LP, Solus Alternative Asset Management LP and Davidson Kempner Capital Management.
A spokesperson for MGM management, led by CEO Gary Barber, had no comment on Loeb's recent investment, the upcoming earnings or whether they are involved in a private placement deal.
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