wisdom Posted October 2, 2014 Share Posted October 2, 2014 The $12 is after a $500 mil dividend. Link to comment Share on other sites More sharing options...
oddballstocks Posted October 2, 2014 Share Posted October 2, 2014 Found these I mixed up the $6 per share from one post and the reducing amount of dividend from the other post. Memory not as good as it once was. Not that anybody cares, but at the current price of $44 here's the way I look at it. I believe there's really no way Lampert won't extract at least $40 for shareholders even if everything blows up in his face (he can extract value via spinoffs, monetizing real estate, and all the stuff we've been discussing on this thread). So, $4 of downside (yes, I'm well aware that the stock could trade below $40) vs. an upside we can't even calculate. I know some disagree but I believe the fact that we can't quantify the max upside is a good thing. I'm not saying I agree with any of the following valuations, but let's look at the risk/reward odds based on what you might think SHLD is worth. The "At $XX" is the amount you think SHLD is worth. At $60 it's 4:1 ratio in your favor ($16 upside vs $4 downside) At $80 it's 9:1 At $100 it's 14:1 At $150 it's 26:1 ...and so on. I would love to hear how you get to a minimum of $40 in a worst case scenario. You've mentioned that number a lot, but I've never seen any figures outlining how you get there. Now since I'm new here maybe I was just missed it, or maybe you don't care to share (which is totally fine). I'm just curious because if you add up all of the monetizations Eddie has completed so far (spin-offs, rights offerings, and special dividends) you get about $13 per share of value (that does not include Lands End). You're saying there's at least $40 more to come in some form or another even if everything blows up in his face. How do you get there? If he distributes the rest of Sears Canada, that's $6. Maybe Lands End is another $6. Sears Auto Centers another $3 maybe. I guess you believe the real estate, if spun out, would be worth $25+ per share, even though hardly any of it is generating a return? Just curious your thought process. AND Full HY KKR as expected: "a Term Loan Facility of approximately $500 million. We expect that the proceeds of the Term Loan Facility will be used to pay a dividend to Sears Holdings immediately " Any views on a scenario where Eddie loads a HY debt structure (say 4-5x EBITDA, 3-4x Interest coverage) on the LE spin and dividends 400-500MM back to SHLD? Offsets 4-5 years of EBITDA lost from LE spin and then used to solve the last sulg of 2014 pension funding. Aggressive use of CF to then pay-down LE debt. Assumes EBITDA has troughed. "In connection with the spin-off, we may incur material indebtedness. Any such indebtedness would be described in an amendment to this information statement." Good call! I was modeling $200-300M but you nailed it. 4x leverage seems high to me, but not egregiously so. Of course, this means LE equity is likely going to trade at a market cap of ~$300M (I'm assuming an EV/EBITDA multiple of 6-7x), so only about $3 per SHLD share, as opposed to some on this thread who pegged it at $10-$12 and Baker Street as high as $15. Depending on your views, you could say that keeping $500M within SHLD would be better for current SHLD shareholders than getting another $5/share of LE stock. On the other hand, it really depends on what Eddie does with this $500M. If it just funds the retail transformation than you might wish you had $8 of LE stock instead of $3. The whole Sears saga reminds me of the Monty Python skit: https://www.youtube.com/watch?v=ikssfUhAlgg "It's just a flesh wound.." Link to comment Share on other sites More sharing options...
BTShine Posted October 2, 2014 Share Posted October 2, 2014 The $12 is after a $500 mil dividend. Exactly! That's a total value to shareholders of 1.83 Billion at today's prices (1.33b+500m). $17 per share to SHLD. Link to comment Share on other sites More sharing options...
Picasso Posted October 2, 2014 Share Posted October 2, 2014 Yeah but where is that extra $500 million. The price of SHLD has been destroyed in the past month (okay maybe the market is inefficient) but SOTP does not work when that $500 million is not in your pockets. It's somewhere in the SYW maze with what appears to be negative returns on invested capital. If I remember right, a lot of guys on this board were selling Lands End to buy more SHLD. So the $12 bucks or more of value has already been chopped in half if you reinvested back into SHLD. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 How do you know for sure? I have no idea what the future of SYW is going to be. Please do share if you know for sure. If SYW pays off it would have created value. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 Or are we just speculating what will be and making decisions based on that. I prefer to look at what i know and what is unknown rather than dreaming up stuff I have no knowledge about. Link to comment Share on other sites More sharing options...
Picasso Posted October 2, 2014 Share Posted October 2, 2014 If SYW was creating positive returns why are they doing a rights offering? Why does Eddie need to personally lend them money to get them through a holiday season? Imagine if some other retailer came out and needed to borrow money outside of commercial paper to get them through the only profitable time of the year. And yet somehow that doesn't seem to matter to long investors in SHLD. SYW ranks waaay low in terms of traffic on Alexa. I think the only people using SYW are employees of Eddie and SHLD shareholders in some kind of "look how great it is, check out this better mousetrap" circlejerk. It doesn't take a genius to know SYW is not creating positive returns. It might be stablizing sales. And if it has positive future returns, why do I need to pay up for that today? Does anyone have any evidence that it will indeed have positive future returns? Now add in that Amazon has many more, better paid employees that are working on that every single day. SOTP doesn't work when the parts are being dismembered to fund a technology pet project by a finance guy. But oh Bezos was a finance guy too, so Eddie has a shot. Yeah well Elon Musk was going to work for Goldman Sachs at one point. Doesn't mean other Goldman Sachs alum can build a successful rocket company. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 So you are saying neither of us knows the future of SYW. Is that right? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted October 2, 2014 Share Posted October 2, 2014 I'm also surprised stock is up on the news. This is no different if Sears spun off SCC and then did a rights offering - both of which would likely drive the Sears-ex SCC shares doen in price. This is dilutive to shareholders who are required to put up more money to maintain proportional ownership of assets all to fund cash burn during the holiday season. I get that this may be better then selling the asset at a discount but it's still truly distasteful...and the stock is up on the news. SMH. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 Zach it may be shorts covering as SHLD will have more cash. Link to comment Share on other sites More sharing options...
Mephistopheles Posted October 2, 2014 Share Posted October 2, 2014 So you are saying neither of us knows the future of SYW. Is that right? Yes neither of you know, as nobody knows the future for sure. That's why you place odds on an investment working out, or not working out. IMO from everything we know about SHLD and SYW so far, the odds are far far far higher that it's a negative return investment than not. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 You could be right. This is the reason people look for MOS in other areas. All I am saying is people should not be talking as if the outcome is set in stone or a foregone conclusion when things are yet to play out. Especially since we have no data to know why ESL is doing what he is doing. He may have data that is causing him to run with SYW or he may be crazy. That is for people to decide. Link to comment Share on other sites More sharing options...
BTShine Posted October 2, 2014 Share Posted October 2, 2014 Fair points. I'm betting that he sees the internal data on SYW (how it affects sales, margins, customer retention when stores are closed, etc, etc) and he believes it is an intelligent investment. He could be wrong, or crazy, but he believes SYW is an intelligent investment and he believes they're seeing results. If you believe Eddie Lampert makes good decisions based upon data then I would trust him that SYW is a good investment. Link to comment Share on other sites More sharing options...
merkhet Posted October 2, 2014 Share Posted October 2, 2014 http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/frmo-frmo-corp/msg191296/#msg191296 I wonder what Murray would say about the loan and the rights offering since the annual meeting happened in August... Link to comment Share on other sites More sharing options...
BTShine Posted October 2, 2014 Share Posted October 2, 2014 Isn't the SCC rights offering nearly identical to the spinoff of SHOS? SHLD gets some money injected into SHLD by shareholders for an asset they believe is worth much more than the capital injection? Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 2, 2014 Share Posted October 2, 2014 Sears: Beware the Postholiday Blues http://online.wsj.com/articles/sears-beware-the-postholiday-blues-heard-on-the-street-1412279390 Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 Breaking news on SHLD - What if an asteroid hits? I think SHLD will go to 0. Sell me all your shares. What if SHLD has a positive Q4? What if SHLD closes enough stores to generate additional cash? What if SHLD gets financing in place? What if SRAC is sold? Link to comment Share on other sites More sharing options...
Mephistopheles Posted October 2, 2014 Share Posted October 2, 2014 You could be right. This is the reason people look for MOS in other areas. All I am saying is people should not be talking as if the outcome is set in stone or a foregone conclusion when things are yet to play out. Especially since we have no data to know why ESL is doing what he is doing. He may have data that is causing him to run with SYW or he may be crazy. That is for people to decide. Fair points. I'm betting that he sees the internal data on SYW (how it affects sales, margins, customer retention when stores are closed, etc, etc) and he believes it is an intelligent investment. He could be wrong, or crazy, but he believes SYW is an intelligent investment and he believes they're seeing results. If you believe Eddie Lampert makes good decisions based upon data then I would trust him that SYW is a good investment. It's been ten years of horrible performance, so I'm not okay with giving him the benefit of the doubt when he says the the numbers look good internally. Furthermore, some of the numbers he has released to investors are misleading. For example, labeling an "active SYW member" as someone with a minimum ONE transaction in a year. Slide 34 of the presentationQ1_2014_Webcast.pdf Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 2, 2014 Share Posted October 2, 2014 You could be right. This is the reason people look for MOS in other areas. All I am saying is people should not be talking as if the outcome is set in stone or a foregone conclusion when things are yet to play out. Especially since we have no data to know why ESL is doing what he is doing. He may have data that is causing him to run with SYW or he may be crazy. That is for people to decide. Fair points. I'm betting that he sees the internal data on SYW (how it affects sales, margins, customer retention when stores are closed, etc, etc) and he believes it is an intelligent investment. He could be wrong, or crazy, but he believes SYW is an intelligent investment and he believes they're seeing results. If you believe Eddie Lampert makes good decisions based upon data then I would trust him that SYW is a good investment. It's been ten years of horrible performance, so I'm not okay with giving him the benefit of the doubt when he says the the numbers look good internally. Furthermore, some of the numbers he has released to investors are misleading. For example, labeling an "active SYW member" as someone with a minimum ONE transaction in a year. Slide 34 of the presentation Getting out once a year is "active" for them. I mean, they don't get out much, obviously, if they still go to Sears. Link to comment Share on other sites More sharing options...
wisdom Posted October 2, 2014 Share Posted October 2, 2014 LOL Link to comment Share on other sites More sharing options...
Picasso Posted October 2, 2014 Share Posted October 2, 2014 I think we can end the thread on that note. Alright fellas, time to go home. Nothing left to see here. Link to comment Share on other sites More sharing options...
Mephistopheles Posted October 3, 2014 Share Posted October 3, 2014 You could be right. This is the reason people look for MOS in other areas. All I am saying is people should not be talking as if the outcome is set in stone or a foregone conclusion when things are yet to play out. Especially since we have no data to know why ESL is doing what he is doing. He may have data that is causing him to run with SYW or he may be crazy. That is for people to decide. Fair points. I'm betting that he sees the internal data on SYW (how it affects sales, margins, customer retention when stores are closed, etc, etc) and he believes it is an intelligent investment. He could be wrong, or crazy, but he believes SYW is an intelligent investment and he believes they're seeing results. If you believe Eddie Lampert makes good decisions based upon data then I would trust him that SYW is a good investment. It's been ten years of horrible performance, so I'm not okay with giving him the benefit of the doubt when he says the the numbers look good internally. Furthermore, some of the numbers he has released to investors are misleading. For example, labeling an "active SYW member" as someone with a minimum ONE transaction in a year. Slide 34 of the presentation Getting out once a year is "active" for them. I mean, they don't get out much, obviously, if they still go to Sears. lol I guess it's considered active also because they visit Sears infinitely more often than the average person does. Link to comment Share on other sites More sharing options...
Uccmal Posted October 3, 2014 Share Posted October 3, 2014 National Post on Sears: http://business.financialpost.com/2014/10/02/sears-canada-tragedy-seen-as-victim-of-overreach-by-u-s-hedge-fund-tycoon-edward-lampert/ Link to comment Share on other sites More sharing options...
Uccmal Posted October 3, 2014 Share Posted October 3, 2014 Fair points. I'm betting that he sees the internal data on SYW (how it affects sales, margins, customer retention when stores are closed, etc, etc) and he believes it is an intelligent investment. He could be wrong, or crazy, but he believes SYW is an intelligent investment and he believes they're seeing results. If you believe Eddie Lampert makes good decisions based upon data then I would trust him that SYW is a good investment. That is alot of ifs, considering he is inept at running a company, and has no concept on how to handle or motivate people. This thread is far beyond flogging a dead horse. Link to comment Share on other sites More sharing options...
wisdom Posted October 3, 2014 Share Posted October 3, 2014 It is a fun article to read The only problem with the article is that ESL did not become the CEO until recently. Mr Beemer forgets to tell us why ESL was able to buy Sears if it was run that well - I believe it was bought in bankruptcy. Also Ms Ki conveniently compares Ackman's retail experience with railways. Railways have been doing well in North America. It is retail that is struggling - she forgot to compare JC Penny to Ackman's Target experience where he did not change the management. Also look at how well Target has done since coming to Canada. The Canadian consumers are on their last leg they have so much debt. Link to comment Share on other sites More sharing options...
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