elevensecsrt4 Posted September 25, 2014 Share Posted September 25, 2014 TRANSACTIONS IN SHARES BY ACCOUNTS ADVISED BY FAIRHOLME CAPITAL MANAGEMENT, L.L.C Transaction Date Shares Price Sale 09/24/2014 10,500 $26.40 Sale 09/25/2014 15,900 $26.05 Is this a separately managed account that Fairholme is selling shares in? I am confused. Also, quite the dip to $24 and subsequent bounce to $26 in 30 minutes. The volatility in this stock is something else. Totally agree with the volatility being incredible. And I hope it is berkowitz selling shares in a managed account. It would be a huge blow if he is a net seller. Link to comment Share on other sites More sharing options...
JRH Posted September 25, 2014 Share Posted September 25, 2014 Is this a separately managed account that Fairholme is selling shares in? I am confused. Having followed Fairholme for many years, there have been a number of occasions where they have filed dispositions in "advised accounts" while the funds go on simultaneously holding or accumulating shares (in other words, in the past, such filings haven't been predictive of anything). It may be a regulatory requirement if someone is closing their account and Fairholme Capital liquidates their position in a holding where Fairholme is a beneficial owner? Link to comment Share on other sites More sharing options...
zenith Posted September 25, 2014 Share Posted September 25, 2014 Fairholme says St. Joe declines to participate in loan for Sears http://www.bloomberg.com/news/2014-09-25/sears-investor-fairholme-says-st-joe-won-t-participate-in-loan.html Link to comment Share on other sites More sharing options...
tng Posted September 25, 2014 Share Posted September 25, 2014 Is this a separately managed account that Fairholme is selling shares in? I am confused. Having followed Fairholme for many years, there have been a number of occasions where they have filed dispositions in "advised accounts" while the funds go on simultaneously holding or accumulating shares (in other words, in the past, such filings haven't been predictive of anything). It may be a regulatory requirement if someone is closing their account and Fairholme Capital liquidates their position in a holding where Fairholme is a beneficial owner? Considering that Fairholme is such a big holder in SHLD that they are considered an insider, I am pretty sure they would have to file if they sell any amount of shares. The question is whether this is a one time sale or whether Berkowitz is trying to cut back on his SHLD position because he believes the thesis has deteriorated. Given the small number of shares exchanged, I would think that it is just someone closing their account or something, because there is enough volume to sell a lot more shares that that each day. Link to comment Share on other sites More sharing options...
krazeenyc Posted September 25, 2014 Share Posted September 25, 2014 Is this a separately managed account that Fairholme is selling shares in? I am confused. Having followed Fairholme for many years, there have been a number of occasions where they have filed dispositions in "advised accounts" while the funds go on simultaneously holding or accumulating shares (in other words, in the past, such filings haven't been predictive of anything). It may be a regulatory requirement if someone is closing their account and Fairholme Capital liquidates their position in a holding where Fairholme is a beneficial owner? Considering that Fairholme is such a big holder in SHLD that they are considered an insider, I am pretty sure they would have to file if they sell any amount of shares. The question is whether this is a one time sale or whether Berkowitz is trying to cut back on his SHLD position because he believes the thesis has deteriorated. Given the small number of shares exchanged, I would think that it is just someone closing their account or something, because there is enough volume to sell a lot more shares that that each day. they did file. The filing said they sold TRANSACTIONS IN SHARES BY ACCOUNTS ADVISED BY FAIRHOLME CAPITAL MANAGEMENT, L.L.C Transaction Date Shares Price Sale 09/24/2014 10,500 $26.40 Sale 09/25/2014 15,900 $26.05 and yes -- if fairholme were liquidating the stock would be decimated. Link to comment Share on other sites More sharing options...
merkhet Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. Link to comment Share on other sites More sharing options...
tng Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. There may have been major conflicts of interest and legal risk due to St. Joe's relationship with Fairholme, and there was some push back from others within St. Joe. The deal sounded weird to me from the beginning because if Sears does blow up, then it would look like Berkowitz is trading against his clients because St. Joe may end up with some nice properties while SHLD collapses. It is probably a legal and potential PR nightmare that isn't worth the small amount of interest in a 3-month loan. Or maybe Berkowitz knew that already and just wanted a peak behind the curtain by making an offer to loan money that he never intended to do. Link to comment Share on other sites More sharing options...
Picasso Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. There may have been major conflicts of interest and legal risk due to St. Joe's relationship with Fairholme, and there was some push back from others within St. Joe. The deal sounded weird to me from the beginning because if Sears does blow up, then it would look like Berkowitz is trading against his clients because St. Joe may end up with some nice properties while SHLD collapses. It is probably a legal and potential PR nightmare that isn't worth the small amount of interest in a 3-month loan. Or maybe Berkowitz knew that already and just wanted a peak behind the curtain by making an offer to loan money that he never intended to do. This is a loan which is backed by real estate. So if SHLD collapses and the properties sell for more than the loan the difference goes to SHLD creditors. St Joe would not end up with nice properties. Link to comment Share on other sites More sharing options...
Luke 532 Posted September 25, 2014 Share Posted September 25, 2014 What would be a spinoff-adjusted new low for the year? Is the earlier low about $24? Just about. Bounced off it pretty hard today. Link to comment Share on other sites More sharing options...
Luke 532 Posted September 25, 2014 Share Posted September 25, 2014 TRANSACTIONS IN SHARES BY ACCOUNTS ADVISED BY FAIRHOLME CAPITAL MANAGEMENT, L.L.C Transaction Date Shares Price Sale 09/24/2014 10,500 $26.40 Sale 09/25/2014 15,900 $26.05 Is this a separately managed account that Fairholme is selling shares in? I am confused. "The securities were held in an account managed indirectly by Bruce R. Berkowitz ("Mr. Berkowitz") and were sold pursuant to client instructions." http://www.sec.gov/Archives/edgar/data/1214344/000091957414005387/xslF345X03/p6106215.xml Link to comment Share on other sites More sharing options...
Luke 532 Posted September 25, 2014 Share Posted September 25, 2014 Luke, this begs the question: if fairholme continues to sell will you stick with your position or follow fairholme out the door? They're not selling and he added 860,000 shares earlier this month, so the possibility of him selling any significant number of shares as a net seller is remote. If they were, that would be up to 25M+ shares of supply hitting the market and I would likely sell my common but keep my calls. Link to comment Share on other sites More sharing options...
txlaw Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. "[N]o more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) . . . " 15% of the current investment account is probably somewhere around $100 million. But JOE already owns SHLD debt. So the amount that JOE can take is likely less than $100 million. I'm thinking ESL wants participations to be taken in large chunks, with $100 million being the smallest chunks he's willing to sell. After all, the fewer lenders he deals with, the better. Link to comment Share on other sites More sharing options...
elevensecsrt4 Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. "[N]o more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) . . . " 15% of the current investment account is probably somewhere around $100 million. But JOE already owns SHLD debt. So the amount that JOE can take is likely less than $100 million. I'm thinking ESL wants participations to be taken in large chunks, with $100 million being the smallest chunks he's willing to sell. After all, the fewer lenders he deals with, the better. But "PYOF" invested 50mil right. 12.5% of the 400mil? Link to comment Share on other sites More sharing options...
txlaw Posted September 25, 2014 Share Posted September 25, 2014 It's definitely a non-mutual fund & non-personal sale. So either a managed account or his hedge fund. Today: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005383/d6106261_13d-a.htm 9/18: http://www.sec.gov/Archives/edgar/data/1056831/000091957414005278/d6101781_13-d.htm It's interesting that St. Joe wasn't able to come to terms with ESL. I wonder what they wanted that he wasn't willing to give. "[N]o more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) . . . " 15% of the current investment account is probably somewhere around $100 million. But JOE already owns SHLD debt. So the amount that JOE can take is likely less than $100 million. I'm thinking ESL wants participations to be taken in large chunks, with $100 million being the smallest chunks he's willing to sell. After all, the fewer lenders he deals with, the better. But "PYOF" invested 50mil right. 12.5% of the 400mil? Actually, you're right. According to the agreement, it looks like ESL (or his affiliated funds) will retain (and intends to retain) $350 million and sell off $50 million to PYOF. So getting rid of large chunks likely is not the reason for the negotiations falling through. Maybe ESL told Bruce B, if you want a piece of this participation interest, you're going to have to pay a premium for it. Link to comment Share on other sites More sharing options...
texual Posted September 25, 2014 Share Posted September 25, 2014 THE SHLD STORY CONTINUES... Link to comment Share on other sites More sharing options...
zenith Posted September 25, 2014 Share Posted September 25, 2014 Bruce Berkowitz interview not sure if he mentioned SHLD as it does not say so in the preview. It will be on Wealthtrack tomorrow on PBS http://www.valuewalk.com/2014/09/bruce-berkowitz-talks-fannie-freddie-aig-bac/ Link to comment Share on other sites More sharing options...
tooskinneejs Posted September 26, 2014 Share Posted September 26, 2014 Imagine how different things would be for Sears right now if it did not have to borrow at usurious interest rates to make it through the holiday season. Better yet, imagine Sears with no debt at all - no short-term borrowings, no capital leases, no long-term debt. Heck, even imagine Sears with no pension and post-retirement benefit obligations. As of the latest quarter, Sears had $6.0 billion of borrowings, capital lease obligations, and unfunded pension and post-retirement benefit obligations. So imagine for a moment that it was all gone and the company was completely debt free. Imagine the funds they would then be able to put to use to invest in store improvements and Shop Your Way or to fix up properties and sell them off. You may rightfully think, "this is an impossible fantasy, so what is the point of imagining this?" Because, in fact, Sears could have accomplished all of this and been completely debt free had it not been for one problem.... The problem? The capital allocator at the helm of Sears decided to use shareholder money, and lots of it, for another purpose. Since 2005, he spent a total of $6.0 billion of shareholders' money to repurchase 59 million shares of common stock. That's right, the capital allocator could have used shareholder money to put the company in a completely debt free position with much less liquidity concerns, but instead he opted to squander the money on shares at prices averaging more than three times current prices (average of $102 per share). So now instead of owning a company with a pristine balance sheet and loads of capacity for reinvestment in its business, shareholders are stuck with a business barely able to fund itself through the important holiday season. Imagine how much more the company would be worth if it didn't have the $6 billion debt noose hanging around its neck right now. What I find more shocking than the waste of $6 billion and the contrast between what could have been and what is, is the continued hero worship, deference, and faith that so many investors continue to place in this "master capital allocator" despite his actual track record with the company. Link to comment Share on other sites More sharing options...
merkhet Posted September 26, 2014 Share Posted September 26, 2014 There are many things that you can fault ESL on. Not being clairvoyant probably isn't one of them. Link to comment Share on other sites More sharing options...
Luke 532 Posted September 26, 2014 Share Posted September 26, 2014 Store closures are ramping up: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-store-closures/120/ Link to comment Share on other sites More sharing options...
Picasso Posted September 26, 2014 Share Posted September 26, 2014 Imagine how different things would be for Sears right now if it did not have to borrow at usurious interest rates to make it through the holiday season. Better yet, imagine Sears with no debt at all - no short-term borrowings, no capital leases, no long-term debt. Heck, even imagine Sears with no pension and post-retirement benefit obligations. As of the latest quarter, Sears had $6.0 billion of borrowings, capital lease obligations, and unfunded pension and post-retirement benefit obligations. So imagine for a moment that it was all gone and the company was completely debt free. Imagine the funds they would then be able to put to use to invest in store improvements and Shop Your Way or to fix up properties and sell them off. You may rightfully think, "this is an impossible fantasy, so what is the point of imagining this?" Because, in fact, Sears could have accomplished all of this and been completely debt free had it not been for one problem.... The problem? The capital allocator at the helm of Sears decided to use shareholder money, and lots of it, for another purpose. Since 2005, he spent a total of $6.0 billion of shareholders' money to repurchase 59 million shares of common stock. That's right, the capital allocator could have used shareholder money to put the company in a completely debt free position with much less liquidity concerns, but instead he opted to squander the money on shares at prices averaging more than three times current prices (average of $102 per share). So now instead of owning a company with a pristine balance sheet and loads of capacity for reinvestment in its business, shareholders are stuck with a business barely able to fund itself through the important holiday season. Imagine how much more the company would be worth if it didn't have the $6 billion debt noose hanging around its neck right now. What I find more shocking than the waste of $6 billion and the contrast between what could have been and what is, is the continued hero worship, deference, and faith that so many investors continue to place in this "master capital allocator" despite his actual track record with the company. Hindsight is 20/20, but with his track record on SHLD he has been terrible for shareholders. The Lampert worship that continues today flies in the face of what has been reality for many years. Assuming he had SHLD issue shares they repurchased for $102 at todays market price, you would infuse $1.5 billion of capital but effectively lock in a $4.5 billion loss from the repurchase. While Lampert and others see the value in SHLD, when you have to start personally lending money to get the company through a holiday season there is something wrong behind the experiment. I was looking at the spin-off of Lands End today and realized it is worth half of SHLD. How many other spin-offs from SHLD have become much more lucrative than SHLD itself? And yet people sell those spin-offs to buy more SHLD. Literally the definition of insanity to keep doing what is just not working. That said this stock has been in a trading range for a while. Another leg lower and I might get interested as a trade or selling some $15 puts. But only because I know some new group of investors will clamor in and discuss ad naseum the value of the real estate and some presentation from a minority investor claiming 6-7x investment returns with a wide margin of safety. Link to comment Share on other sites More sharing options...
fareastwarriors Posted September 26, 2014 Share Posted September 26, 2014 Lampert’s Hedge Fund Loses Participant in Loan to Sears http://dealbook.nytimes.com/2014/09/25/lamperts-hedge-fund-loses-participant-in-loan-to-sears/?_php=true&_type=blogs&ref=business&_r=0 Link to comment Share on other sites More sharing options...
ni-co Posted September 26, 2014 Share Posted September 26, 2014 BERKOWITZ bailing out? Sears Holdings Corp (NASDAQ:SHLD) major shareholder Bruce R. Berkowitz sold 26,400 shares of the company’s stock on the open market in a transaction dated Thursday, September 25th. The stock was sold at an average price of $26.19, for a total transaction of $691,416.00. Following the sale, the insider now directly owns 913,000 shares of the company’s stock, valued at approximately $23,911,470. http://www.sec.gov/Archives/edgar/data/1214344/000091957414005387/xslF345X01/p6106215.xml Scary thing is, that those sales occurred right after St Joe ended discussions to finance SHLD. Answer: TRANSACTIONS IN SHARES BY ACCOUNTS ADVISED BY FAIRHOLME CAPITAL MANAGEMENT, L.L.C Transaction Date Shares Price Sale 09/24/2014 10,500 $26.40 Sale 09/25/2014 15,900 $26.05 Is this a separately managed account that Fairholme is selling shares in? I am confused. "The securities were held in an account managed indirectly by Bruce R. Berkowitz ("Mr. Berkowitz") and were sold pursuant to client instructions." http://www.sec.gov/Archives/edgar/data/1214344/000091957414005387/xslF345X03/p6106215.xml Link to comment Share on other sites More sharing options...
paperwerks Posted September 26, 2014 Share Posted September 26, 2014 The client said get me the hell out of this. Surely, either BB or one of his associates tried to explain to the client that SHLD is a no brainer 2, 3,4, or 5 bagger. The client still said get me the hell out. Makes you wonder why ssrap (sears unsecured debt unconditionally guaranteed by SHLD) trades for less than fifty cents on the dollar. IF SHLD is a multibagger why are SHLD bonds trading for under 50 cents on the dollar? Maybe this is NOT a no brainer and both SSRAP and SHLD common could easily be zeros after Eddie arranges the DIP?? Link to comment Share on other sites More sharing options...
paperwerks Posted September 26, 2014 Share Posted September 26, 2014 What would be the valuation of SHLD real estate done during in a distressed situation? IE during a recession or slowdown, when the real estate is occupied by money losing Sears and Kmarts that can not afford to pay any rent, and even after they can be evicted the real estate needs to be both remodeled and repartitioned and new tenants found? And what if this valuation was approved by the chairman of the equity committee in a BK (eddie) and the DIP loan with its brutal terms was arranged by and provided by Eddie? Of course, this valuation would be provided by a "neutral" "3rd party investment bank" If the equity committee approved and the 2016 bonds were to be paid in full then there would be really nothing SHLD common stockholders and unsecured bondholders could do. Right? Really, could they pay off the DIP and also fund the exit?? Not likely. Therefore, they would be zeroes unless Eddie throws them a bone. Sounds like the Kmart bankruptcy redux except some SHLD common stockholders on this board might be taken by surprise....... Link to comment Share on other sites More sharing options...
Vish_ram Posted September 26, 2014 Share Posted September 26, 2014 What would be the valuation of SHLD real estate done during in a distressed situation? IE during a recession or slowdown, when the real estate is occupied by money losing Sears and Kmarts that can not afford to pay any rent, and even after they can be evicted the real estate needs to be both remodeled and repartitioned and new tenants found? And what if this valuation was approved by the chairman of the equity committee in a BK (eddie) and the DIP loan with its brutal terms was arranged by and provided by Eddie? Of course, this valuation would be provided by a "neutral" "3rd party investment bank" If the equity committee approved and the 2016 bonds were to be paid in full then there would be really nothing SHLD common stockholders and unsecured bondholders could do. Right? Really, could they pay off the DIP and also fund the exit?? Not likely. Therefore, they would be zeroes unless Eddie throws them a bone. Sounds like the Kmart bankruptcy redux except some SHLD common stockholders on this board might be taken by surprise....... Here is my pet theory. First cash losses will accelerate as death spiral continues. As economy starts peaking in 2-4 years, the real retail sales for all retailers will start leveling off. See http://static.cdn-seekingalpha.com/uploads/2014/2/6050591_13916161523711_2.png Retailers will put brakes on their expansion plans. The demand for real estate will cool. The huge debt of 2B will come due at the worst possible moment. With accumulated losses, they'll struggle to refinance the 2B debt. If you saw 7$ drop in stock for $400MM easy loan, wait until you see the drama for 2B. You'll get 50cents on dollar in RE at best. Add this to future cash losses, the common stock will be worth 0 or in low single digits if lucky. Link to comment Share on other sites More sharing options...
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