I've been watching MGM for quite a while (I love Vegas and particularly love the MGM properties). I have also never shorted anything but I am very tempted to short MGM now.
About a month ago this thing was under $2 and as I type this it is at $13
The recent rise on announcing Q1 profits of $105M was thanks to the $755M sale of their Treasure Island property. Without that sale, they would have posted a substantial loss.
The only other news that has caused this 500% rise is that their City Center project ($9B property on the strip) has come to some financing arrangement that will guarantee its completion.
I could write a lot about City Center here - but I think this money hole is going to sink them. The market seems to believe it is going to save them.
In spite of Q1 "profits" and the security of the funds to complete the City Center project - all I can see is a company burdened by an insurmountable pile of debt ($13B and counting) and no real ability to continue to finance their operations which will certainly post losses for the rest of the year (unless they sell more properties).
I seriously expect that MGM will go into bankruptcy protection sometime in the next year or so. $600M in interest payments and $1.2B in bond payments due in 2009.
My question for discussion - why is the market supporting this stock so well for the past 5 weeks? Has the grim balance sheet somehow changed that I am missing?
Seriously considering shorting this one - does anyone have opinions on such a move?
About a month ago this thing was under $2 and as I type this it is at $13
The recent rise on announcing Q1 profits of $105M was thanks to the $755M sale of their Treasure Island property. Without that sale, they would have posted a substantial loss.
The only other news that has caused this 500% rise is that their City Center project ($9B property on the strip) has come to some financing arrangement that will guarantee its completion.
I could write a lot about City Center here - but I think this money hole is going to sink them. The market seems to believe it is going to save them.
In spite of Q1 "profits" and the security of the funds to complete the City Center project - all I can see is a company burdened by an insurmountable pile of debt ($13B and counting) and no real ability to continue to finance their operations which will certainly post losses for the rest of the year (unless they sell more properties).
I seriously expect that MGM will go into bankruptcy protection sometime in the next year or so. $600M in interest payments and $1.2B in bond payments due in 2009.
My question for discussion - why is the market supporting this stock so well for the past 5 weeks? Has the grim balance sheet somehow changed that I am missing?
Seriously considering shorting this one - does anyone have opinions on such a move?