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SHLDQ - Sears Holdings Corp


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Anyone know how this rights offering would impact a short put and warrant position? How does the exercise price get adjusted? Thanks

 

Option adjustments:

SHLD@NASDAQ ; Rights Issue ; Jun 10, 2015 ; 36858

36859

36860

36864

36865

36866

36867

36868

36869

36870 ;

 

 

All OCC memos may be accessed by navigating to http://www.theocc.com/webapps/infomemos ( http://www.theocc.com/webapps/infomemos )

Memo 36858 is probably what you're looking for, for options.

 

For the warrant, adjustments are decided by the Board IIRC. It'll likely be either the market value of the rights at close yesterday, or an average of the market value over the life of the rights.

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Anyone know how this rights offering would impact a short put and warrant position? How does the exercise price get adjusted? Thanks

 

Option adjustments:

SHLD@NASDAQ ; Rights Issue ; Jun 10, 2015 ; 36858

36859

36860

36864

36865

36866

36867

36868

36869

36870 ;

 

 

All OCC memos may be accessed by navigating to http://www.theocc.com/webapps/infomemos ( http://www.theocc.com/webapps/infomemos )

Memo 36858 is probably what you're looking for, for options.

 

For the warrant, adjustments are decided by the Board IIRC. It'll likely be either the market value of the rights at close yesterday, or an average of the market value over the life of the rights.

 

http://www.optionsclearing.com/webapps/infomemos;OCCPROD0PUBSESSION=4B352A19A54F6C931C2301F4BB4B900A.occ-ppube4l?number=36859&data-ipsquote-timestamp=201506&lastModifiedDate=06%2F08%2F2015+16%3A03%3A57

 

"The underlying price for SHLD1/1SHLD1 will be determined as follows:

SHLD1 = SHLD + 0.30 (LE) + 0.0236 + SRG RT

 

The SRG RT component of adjusted options SHLD1/1SHLD1 will remain a part of the SHLD1/1SHLD1 deliverable until the Rights have expired. Once the expiration of the Rights has been confirmed, the SRG RT component will be removed from the SHLD1/1SHLD1 deliverable. This change to the deliverables is expected to be effective on July 6, 2015."

 

So we lose all the value of Seritage (from the rights)... this sucks!

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Just got a broker request to make my shares available for their securities lending program.  The last time they contacted me to request my participation in the program was November '14.

FYI, lending the warrants (SHLDW) with IB consistently brings in 11-13% (annualized)... even though IB takes half of the pie (so the borrowing cost is double that).

 

So we lose all the value of Seritage (from the rights)... this sucks!

Yes. It was the same in 2014 with the rights offering; I'm guessing it's the typical ruling in spinoff by rights.

 

I wanted to sell some calls before the spin-off to benefit from this, but in the end I didn't.

 

So where do the warrants get adjusted? Down to $25 or so?

I would say in the $22-25 range, but wait & see.

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Anyone know how this rights offering would impact a short put and warrant position? How does the exercise price get adjusted? Thanks

 

Option adjustments:

SHLD@NASDAQ ; Rights Issue ; Jun 10, 2015 ; 36858

36859

36860

36864

36865

36866

36867

36868

36869

36870 ;

 

 

All OCC memos may be accessed by navigating to http://www.theocc.com/webapps/infomemos ( http://www.theocc.com/webapps/infomemos )

Memo 36858 is probably what you're looking for, for options.

 

For the warrant, adjustments are decided by the Board IIRC. It'll likely be either the market value of the rights at close yesterday, or an average of the market value over the life of the rights.

 

http://www.optionsclearing.com/webapps/infomemos;OCCPROD0PUBSESSION=4B352A19A54F6C931C2301F4BB4B900A.occ-ppube4l?number=36859&data-ipsquote-timestamp=201506&lastModifiedDate=06%2F08%2F2015+16%3A03%3A57

 

"The underlying price for SHLD1/1SHLD1 will be determined as follows:

SHLD1 = SHLD + 0.30 (LE) + 0.0236 + SRG RT

 

The SRG RT component of adjusted options SHLD1/1SHLD1 will remain a part of the SHLD1/1SHLD1 deliverable until the Rights have expired. Once the expiration of the Rights has been confirmed, the SRG RT component will be removed from the SHLD1/1SHLD1 deliverable. This change to the deliverables is expected to be effective on July 6, 2015."

 

So we lose all the value of Seritage (from the rights)... this sucks!

 

 

See the reader comments on this article about the warrant price/count adjustments…

 

http://seekingalpha.com/article/3256615-sears-holdings-common-warrants-and-seritage-rights-are-substantially-mispriced

 

 

 

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Has anyone tried selling their Rights? I put in an order below what I was told the bid/ask was, but it did not execute.

 

I tried to exercise the right today through Ameritrade and they said the terms have not been set yet and they were waiting for additional detail from the company. I'm not sure what that might be, my sense was that it was set. They said to call back tomorrow.

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Has anyone spent a lot of time on the "exchange" language in the Seritage prospectus?

 

 

The way the Fairholme and Lampert entities are getting their shares are stipulated by two exchange agreements, both of which weren't filed as exhibits, though the prospectus says they were.

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I sold my rights for prices between $4.7 and $6.2. I use IB.

 

I'm not sure what you're referring to, JAllen? From memory:

- There is an "UPREIT" structure, with Lampert receiving a large portion of the operating subsidiary

- Berkowitz has voting and non-voting shares

- Lampert also has non-economic shares

Why do the details matter to you?

 

As for the lawsuit, since all SHLD shareholders can participate proportionally to the size of their holdings, I don't see how the spin-off by rights is unfair. But I'm no lawyer.

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I was wondering if there was a way that there will end up being less than ~55m shares outstanding.

 

Was thinking that the ESL and Fairholme exchange agreementshave could allow them to swap their rights for OP units, and that they would invest less cash than their 76m* $29.58 per share.

 

There is quite a bit of language in the prospectus that suggests this could happen, and there is some that says this is not what is happening.  So just a curiosity I have.

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http://www.sec.gov/Archives/edgar/data/923727/000119312515224092/d943054dsc13da.htm

 

 

"The Reporting Persons are filing this Amendment to report: (i) a distribution of shares of Holdings Common Stock by SPE Master I on a pro rata basis to its partners, including to RBS; (ii) a distribution of shares of Holdings Common Stock by SPE I on a pro rata basis to its partners, including to RBS; and (iii) a distribution of shares of Holdings Common Stock by RBS to Mr. Lampert on a pro rata basis."

 

"Pursuant to the Seritage Rights Offering, Holdings distributed to Partners, SPE I, SPE Master I, CRK LLC, Institutional and Mr. Lampert, at no charge, an aggregate of 51,765,284 subscription rights. The SPEs are liquidating entities and do not make new investments, such as the exercise of subscription rights. Accordingly, on June 15, 2015, the SPEs distributed pro rata to each of their respective owners, including indirectly Mr. Lampert, all the subscription rights they received in the Sertiage Rights Offering.”

 

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I was wondering if there was a way that there will end up being less than ~55m shares outstanding.

 

Was thinking that the ESL and Fairholme exchange agreementshave could allow them to swap their rights for OP units, and that they would invest less cash than their 76m* $29.58 per share.

 

There is quite a bit of language in the prospectus that suggests this could happen, and there is some that says this is not what is happening.  So just a curiosity I have.

 

I've attached what I'm calculating as the shares outstanding.  Its my understanding that SRG will own 55.1% of the operating partnership (OP) and ESL will own 44.9% of the OP.  The common shares outstanding will be 30.6, on a fully-diluted basis.  The Class C (fairholme shares), non-voting will actually not show up as common shares unless they've converted, but I will assume that they'll be converted.  Also, it would seem that Eddie's non-economic OP shares wouldn't really have value unless converted.  Either way, the total fully-diluted share count should be 55.6 million.  Not quite sure what to make of the 1.2 million non-economic shares that aren't reflected in the share count, but it wasn't substantial enough for me to dig further. 

SRG_Share_Count.JPG.5cd876fcab65a72caf3c518f5528d3d5.JPG

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All bearish comments I've read on the REIT rights offering so far have largely ignored the value of the long term lease contracts which remain at SHLD. Yes, SHLD can't put those into a REIT. Yet, you're hugely underestimating the worth of the remaining SHLD RE by not taking them into account. Berkowitz treats those long term contracts as equivalents to ownership – and rightly so in my opinion.

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I didn't participate in the rights offering because I held options. I didn't analyze Seritage (because I didn't have time to do it) but my guess is that the risk/reward ratio is not even close to SHLD. As of now, I'm only holding SHLD calls.

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