SHLDQ - Sears Holdings Corp

[Guest wellmont]

With respect, I don't see the value in tracking shld and kmart sentiment, mindshare, tweets, likes, etc.  there may be some good things going on at sears and kmart; but they don't counter balance all of the bad things.

 

the retail operations are Consumers of Capital. They incinerate it. Up in smoke. The good news is this is an asset heavy company with a great capital allocator in charge. He needs to occasionally sell off assets to replenish the cash that is burned in the retail operations so that he can keep the doors open. The bet is that at the end of the day, this strategy will add some value to the share price.

 

But I for one pay zero attention to anecdotal data points about the shld retail operations. I will read the quarterly report and take notice of the continuing flow of red ink. I operate under the assumption that shld retail is never going to come back, and it's never going to be profitable. And for this stock to work, eddie will have to perform his magic.

 

However, he does not seem to be in any rush to do this though, which is why the stock regularly goes up 5% in a session and down 5% the next.

[alertmeipp]

Why down so much days?

[ourkid8]

No idea and thank god I got out at a much higher price.

 

Tks,

S

[wisdom]

tax loss selling/profit taking - who cares.

 

Thing to consider -

1) What will Eddie do with all the cash he has been raising both in ESL and within SHLD?

2) Can Eddie earn market beating returns with his capital - if yes - where is most of his capital allocated? If you were ever looking for the opposite of diversification, then Eddie is it.

[merkhet]

No idea why it's down so much today.

 

I'm surprised at the amount of shares that traded today though -- over 3 million versus a daily average of 800 thousand.

[tombgrt]

Guess that remaining float is a bit higher than first thought... ;)

 

I'm wary of Lampert's focus on making his SYW program work and assume he'll put in a lot more cash going forward. He really wants to make this work and so far his track record in this little retail experiment is extremely against him.

[AZ_Value]

Maybe it's down because Lampert is selling a lot of SHLD.

 

http://seekingalpha.com/currents/post/1444091?source=email_rt_mc_readmore&app=1

 

http://www.sec.gov/Archives/edgar/data/923727/000119312513460747/d639471dsc13da.htm?source=email_rt_mc_body&app=n

 

Since many people seem to focus so much on what Lampert does as opposed to Sears operations. Can someone explain this?

[tombgrt]

Ha! Guess I already got my answer on the float puzzle...

[Parsad]

Maybe it's down because Lampert is selling a lot of SHLD.

 

http://seekingalpha.com/currents/post/1444091?source=email_rt_mc_readmore&app=1

 

http://www.sec.gov/Archives/edgar/data/923727/000119312513460747/d639471dsc13da.htm?source=email_rt_mc_body&app=n

 

Since many people seem to focus so much on what Lampert does as opposed to Sears operations. Can someone explain this?

 

Redemptions at ESL.  Cheers!

[Luke 532]

Maybe it's down because Lampert is selling a lot of SHLD.

 

http://seekingalpha.com/currents/post/1444091?source=email_rt_mc_readmore&app=1

 

http://www.sec.gov/Archives/edgar/data/923727/000119312513460747/d639471dsc13da.htm?source=email_rt_mc_body&app=n

 

Since many people seem to focus so much on what Lampert does as opposed to Sears operations. Can someone explain this?

 

As Parsad said, just redemptions since it's ESL.  Better than it being Eddie Lampert's personal holdings, but disconcerting nonetheless.

 

In other news, it looks like Seritage and Nordstrom have a deal: http://online.wsj.com/article/PR-CO-20131203-909242.html?dsk=y

[alertmeipp]

Ok. Maybe we will get another chance to load up

[AZ_Value]

Maybe it's down because Lampert is selling a lot of SHLD.

 

http://seekingalpha.com/currents/post/1444091?source=email_rt_mc_readmore&app=1

 

http://www.sec.gov/Archives/edgar/data/923727/000119312513460747/d639471dsc13da.htm?source=email_rt_mc_body&app=n

 

Since many people seem to focus so much on what Lampert does as opposed to Sears operations. Can someone explain this?

 

As Parsad said, just redemptions since it's ESL.  Better than it being Eddie Lampert's personal holdings, but disconcerting nonetheless.

 

In other news, it looks like Seritage and Nordstrom have a deal: http://online.wsj.com/article/PR-CO-20131203-909242.html?dsk=y

 

Yeah, you guys are most likely right. Although didn't he still hold about a billion in AN and a couple hundred mil in GPS? I would think he'd completely sell out of those before starting to take big chunks out of his SHLD. Especially since he's undoubtedly working towards closing down ESL to focus entirely on Sears.

[Myth465]

After all this float talk, its strange that this isnt getting more fuss.

[krazeenyc]

After all this float talk, its strange that this isnt getting more fuss.

 

 

I don't own any SHLD right now, but I actually am looking for an entry point again. No fuss needed -- I think there is no question that having 7 million shares in the open market and out of the control of ESL is a negative catalyst in the short term.

[merkhet]

 

 

As Parsad said, just redemptions since it's ESL.  Better than it being Eddie Lampert's personal holdings, but disconcerting nonetheless.

 

 

Yeah, you guys are most likely right. Although didn't he still hold about a billion in AN and a couple hundred mil in GPS? I would think he'd completely sell out of those before starting to take big chunks out of his SHLD. Especially since he's undoubtedly working towards closing down ESL to focus entirely on Sears.

 

 

It's redemptions. The filing itself says the following:

 

 

The Reporting Persons are filing this Amendment to report (i) grants of Holdings Common Stock by Holdings to Mr. Lampert pursuant to the Letter that have increased the amount of Holdings Common Stock that the Reporting Persons may be deemed to beneficially own and (ii) a distribution of Holdings Common Stock by Partners on a pro rata basis to limited partners that elected to redeem all or a portion of their limited partnership interests in Partners in December 2013.

 

 

I'm curious to see how this plays out.

 

It'll depend on what happens with the additional 7 million shares. If it gets soaked up as short sales, then we will be roughly where we started in terms of limited float -- possibly down a bit from these prices in the short-term.

[Guest wellmont]

After all this float talk, its strange that this isnt getting more fuss.

 

because it demolishes one of the primary bullish arguments in the thread --- that ESL was gobbling up shld shares and limiting the float. maybe the master plan is for ESL to be rid of this nightmare once and for all?

[jeffmori7]

Is it me or before, when there were some redemptions at ESL, Lampert was buying all those shares, so ownership of Lampert never got down? But this time, no filling like he is buying those shares?

[BTShine]

Is it me or before, when there were some redemptions at ESL, Lampert was buying all those shares, so ownership of Lampert never got down? But this time, no filling like he is buying those shares?

 

You are correct.  In the past he has purchased some of the shares to fund redemptions, etc.  I believe this was done at a lower price than the ~$62 he distributed shares at yesterday.  He bought shares around $40 this year. 

 

Based upon his actions one could assume he thinks SHLD is a steal at $40, but not a steal at $60. 

 

Also, a higher float and a lower share price allows SHLD to repurchase stock at a lower price IF they ever buy back more stock.  It's an if at this point, but since Lampert isn't likely to sell any shares in the short term he may like a lower share price for the time being. 

 

 

[Luke 532]

After all this float talk, its strange that this isnt getting more fuss.

 

because it demolishes one of the primary bullish arguments in the thread --- that ESL was gobbling up shld shares and limiting the float. maybe the master plan is for ESL to be rid of this nightmare once and for all?

 

It's important to recognize the difference between the arguments in favor of the trade vs. the investment.

 

At least in my case if you go back and read any post I made on short interest, float, etc. it was for the potential of a short squeeze and I have played it through call options, bull call spreads, etc.  It is a trade. 

 

The actual value investment thesis, and the reason I own so much common stock, has nothing to do with the potential short squeeze... that thesis is the value of the real estate, brands, and inventory less liabilities.  It is an investment.

 

I know people that like SHLD as an investment but don't like the risk/reward on the short squeeze trade.  But they do recognize the difference, which is important.

[Guest wellmont]

understood. but the fact remains that ESL controls less of the upside than he did last week. It's clear he could have redeemed the partnership units in cash and or other securities.

[BTShine]

understood. but the fact remains that ESL controls less of the upside than he did last week. It's clear he could have redeemed the partnership units in cash and or other securities.

 

You're right.  He clearly doesn't think SHLD is a steal at $62. 

[Luke 532]

understood. but the fact remains that ESL controls less of the upside than he did last week. It's clear he could have redeemed the partnership units in cash and or other securities.

 

You're right.  He clearly doesn't think SHLD is a steal at $62.

 

I wouldn't be so sure about that.  There could be a bit of gamesmanship going on.  He realizes the media will see this as "he's getting out" or "he has lost confidence" and that more than likely would cause a price drop... especially with the shorts likely gaining confidence as a result. 

 

I wouldn't be surprised if Sears Holdings bought back shares if it gets to the $40's.  I also wouldn't be surprised if Lampert bought shares at that price.  I'm not saying this is his plan, but if he gets a better price to buy more shares in a few months by selling his partner's shares today, well, I just don't think he would mind that one bit.

[alertmeipp]

http://online.wsj.com/news/articles/SB10001424052702304854804579236671987758310

 

Investors who decided to exit Edward Lampert's hedge fund this year received payment in Sears stock.

 

The fund, ESL Partners, said it distributed about 7.4 million shares of Sears Holdings Corp. SHLD -7.72%  to those investors. The stock was worth around $445 million at the closing price Monday, the date on a securities filing disclosing the move.

 

The holdings of Mr. Lampert's fund are highly concentrated in shares of Sears, a storied retailer whose performance has been deteriorating quickly. Investors who sought to exit received those same shares.

 

Sears stock fell 7.7% Tuesday in much heavier trading than usual. Some 3.2 million shares changed hands, about four times the normal volume, according to FactSet.

 

Mr. Lampert acquired Kmart out of bankruptcy in 2003 and two years later combined it with Sears, Roebuck & Co. to create Sears Holdings. The combination initially performed well, but the business has racked up heavy losses in recent years, leading Mr. Lampert to sell stores and spin off divisions.

 

The shares have performed well this year, rising 34% even as the company's net loss deepened to $1 billion in the nine months ended Nov. 2 from a loss of $441 million a year earlier. Revenue in the period fell 7% to $25.6 billion.

 

The hedge-fund manager took over as chief executive of Sears this year and has touted investments in technology and the company's membership program. But analysts have criticized him for underinvesting in the company's 2,000-plus retail stores, and sales have continued to erode.

 

In October, the company said it might separate its Lands' End brand and would consider strategic alternatives for its line of auto centers. It had previously spun off a stake in Sears Canada Inc. as well as the Sears Hometown and Outlet Stores Inc. and Orchard Supply Hardware Stores Corp.

 

Using stock to pay off investors in his hedge fund reduced Mr. Lampert's stake in Sears—distributed among his hedge fund and other vehicles—to 48.4% from 55.4% earlier. Mr. Lampert and his fund didn't otherwise reduce their holdings.

 

"My significant personal ownership in the company is a sign of my confidence and alignment with all shareholders," Mr. Lampert said.

 

Sears said in November that it was on track to generate $2 billion in cash and available borrowing this year, more than its original target of $500 million.

 

Write to Justin Lahart at justin.lahart@wsj.com and Suzanne Kapner at Suzanne.Kapner@wsj.com

[Guest wellmont]

understood. but the fact remains that ESL controls less of the upside than he did last week. It's clear he could have redeemed the partnership units in cash and or other securities.

 

You're right.  He clearly doesn't think SHLD is a steal at $62.

 

I wouldn't be so sure about that.  There could be a bit of gamesmanship going on.  He realizes the media will see this as "he's getting out" or "he has lost confidence" and that more than likely would cause a price drop... especially with the shorts likely gaining confidence as a result. 

 

I wouldn't be surprised if Sears Holdings bought back shares if it gets to the $40's.  I also wouldn't be surprised if Lampert bought shares at that price.  I'm not saying this is his plan, but if he gets a better price to buy more shares in a few months by selling his partner's shares today, well, I just don't think he would mind that one bit.

 

Not exactly what Buffett would do to his partners. but it is what it is....

[merkhet]

I'm not sure if we can assume that ESL has extra cash with which to distribute for redemptions -- it's possible that redemptions were met with using both cash & SHLD securities.  It's also unclear to me whether Eddie has additional cash around to purchase the redemptions from his limited partners.

 

It does surprise me that he chose to part with SHLD shares rather than AN or GPS shares though...