MGM REBOUNDS UNDER NEW MANAGERS; STUDIO'S 3RD-QUARTER EARNINGS EXPECTED TO BE HIGH.

Byline: Dave McNary Staff Writer

Leo the Lion, symbol of the legendary Metro-Goldwyn-Mayer studio, roars into the new trading week today sitting at his highest vantage on Wall Street in a year and half.

And Leo may continue his run this week as MGM releases what many think will be better-than-expected third-quarter earnings on Tuesday.

MGM shares, which had been driven down by a large number of short sellers in recent months, jumped an astounding 48 percent from the end of trading Tuesday through Friday by rising from $15.50 to $22.875. Shares have not been that high since the spring of 1998 when the studio released ``Man In the Iron Mask'' at the peak of the post-``Titanic'' frenzy over star Leonardo DiCaprio.

What triggered last week's run-up? That's a complex question about a complex company that's 89 percent owned by billionaire Kirk Kerkorian.

First off, MGM canceled a $750 million secondary stock offering on Tuesday after the market closed, even though the offering was fully subscribed and would have broadened the base of shareholders. It explained the withdrawal by saying the stock price didn't reflect its real value.

Instead, MGM substituted a $720 million rights offering that will enable shareholders to buy more shares at the discount price of $14.50 if they own the stock by Friday. Demand for shares grew due to the deadline plus the pressure on short sellers to buy shares to cover their positions as the stock rose, gaining $4.50 to $20 on Wednesday.

MGM also fed the fire by announcing Wednesday it would release its third-quarter earnings this Tuesday, a week early and three days before Friday's deadline. That was taken as a hint the report will show Kerkorian's new management team, installed in April, has started to turn around the long-troubled studio.

During the first six months of 1999, MGM reported a loss of $556.4 million including $225 million in movie write-offs, severance costs for the former management team and costs of withdrawing from the UIP foreign distribution partnership. That period also included a pair of box office duds, ``Mod Squad'' and ``The Rage: Carrie 2.''

MGM's new management, led by long-time Kerkorian associate Alex Yemenidjian and former Universal Studios production chief Chris McGurk, peddled the idea of a turnaround at the company's July shareholders meeting and the subsequent road show for the offering. Notable achievements so far:

Changing release dates for ``The Thomas Crown Affair'' from June to August and for ``Stigmata'' from July to September, both less costly from the advertising and promotion standpoint. ``Crown'' topped $67 million and ``Stigmata'' has grossed $46 million - far short of blockbuster status but more than adequate.

Forming a partnership to produce films with top independent producer Miramax.

Boosting cash flow by creating MGM-branded cable and satellite networks to exploit the massive MGM library.

Starting development of more sequels to its films, including a sixth ``Rocky,'' a 10th ``Pink Panther,'' and a second ``Basic Instinct.''

Regaining control of the rights to many of its films. It recently reached a deal with Time Warner to reclaim the rights to 800 films, including ``West Side Story,'' ``Annie Hall,'' ``Moonstruck'' and ``The Magnificent Seven.''

Shifting United Artists into a secondary role as a label for low-budget fare and moving president Lindsay Doran into a producing slot.

Creating a buzz for the 19th James Bond movie, ``The World Is Not Enough,'' set for a Nov. 19 opening. Strong business is expected around the world.

Finally, investors may be betting that the 81-year-old Kerkorian will not repeat his strategy of selling off pieces of the Santa Monica-based studio. Instead, some figure Kerkorian may be looking for a chance to be remembered as the man who revived MGM.