SHLDQ - Sears Holdings Corp

[wisdom]

$1 per share for 1 store. Luke needs 28 more of these to hit his magcal $29/ share of value.

 

EDIT: Unless SHLD is bankrupt soon.

[Picasso]

$1 per share for 1 store. Luke needs 28 more of these to hit his magcal $29/ share of value

 

Now just back out the debt and other obligations.  You need closer to $55 worth.

[wisdom]

The liabilities are over a long period of time. They will be taken care off - unless the bankruptcy happens soon.

[Mephistopheles]

$1 per share for 1 store. Luke needs 28 more of these to hit his magcal $29/ share of value.

 

EDIT: Unless SHLD is bankrupt soon.

 

I think the difference in opinion is not the value of the RE, but what will become of these monetizations. Probably this $102 million will be used to further SYW, and that's the problem for those of us who are on the sidelines. (I'm not a Bear either; just not confident either way).

[Luke 532]

Another 271,800 shares for Fairholme (Monday, Tuesday, today): http://www.sec.gov/Archives/edgar/data/1214344/000091957414005944/xslF345X03/p6177965.xml

[wisdom]

Mephistopheles - I agree, in your case it is an opinion of when the value is realized, but, there are more people who believe this to be something close to $0 no matter what. Why do you think Bruce is able to buy at these levels. Because most of the world believes there is no value here.

 

As Berkowitz and Lampert continue throwing good money after bad, we will know sooner rather than later why they are hell bent on destroying their hard earned reputations on something that they are about to loose a lot of their personal money along with their reputations. They own close to 75% of the company now or $3 B - we are not talking about chump change anymore even for the 2 of them.

 

It is a possibility that both of them have been lucky so far in their careers and the reason they have such large positions is only because of consistency bias and the fact Bruce has publicly committed to this idea.

 

The Sears saga continues - what else is new.

[Luke 532]

Another 271,800 shares for Fairholme (Monday, Tuesday, today): http://www.sec.gov/Archives/edgar/data/1214344/000091957414005944/xslF345X03/p6177965.xml

 

Over the past 8 trading days Fairholme has purchased 1 of every 22 shares traded.  That's a boatload these days of HFT, day traders, etc.

 

Fairholme: 0.675M

Volume: 15.357M

[Mephistopheles]

Mephistopheles - I agree, in your case it is an opinion of when the value is realized, but, there are more people who believe this to be something close to $0 no matter what. Why do you think Bruce is able to buy at these levels. Because most of the world believes there is no value here.

 

As Berkowitz and Lampert continue throwing good money after bad, we will know sooner rather than later why they are hell bent on destroying their hard earned reputations on something that they are about to loose a lot of their personal money along with their reputations. They own close to 75% of the company now or $3 B - we are not talking about chump change anymore even for the 2 of them.

 

It is a possibility that both of them have been lucky so far in their careers and the reason they have such large positions is only because of consistency bias and the fact Bruce has publicly committed to this idea.

 

The Sears saga continues - what else is new.

 

Well, I don't think it will ever go to $0. I think (if SYW doesn't work) Eddie will sooner or later stop the cash burn. The problem is that until that happens, value continues to be destroyed. So it may very well be that by that the time, after paying off all liabilities, the shareholders don't make much of a profit, if any. And given all the scenarios and the complexity, I would only invest if the returns are enormous.

 

Sure they are two smart guys, but over the course of history many smart people have made really dumb mistakes. Just look at Bill Ackman and Ron Johnson. They both had tons of capital at stake and Johnson was supposedly a retail expert. And then of course, there is the Michael Dell scenario. I'm not saying this is likely, but it has happened.

 

Eddie keeps insisting that SYW is working based on internal numbers, but it's hard to keep giving a benefit of a doubt quarter after quarter as losses keep piling up. The least management could do is acknowledge the problems and be more open, and maybe then I'd buy in again. But even there, it's a guessing game. So overall, it's too much speculation for me. It is certainly very challenging and fascinating, and I think those were (wrongly) some reasons why I had invested in the first place. But there are easier scenarios out there to understand, and that's where I'd rather have my money.

[muscleman]

Mephistopheles - I agree, in your case it is an opinion of when the value is realized, but, there are more people who believe this to be something close to $0 no matter what. Why do you think Bruce is able to buy at these levels. Because most of the world believes there is no value here.

 

As Berkowitz and Lampert continue throwing good money after bad, we will know sooner rather than later why they are hell bent on destroying their hard earned reputations on something that they are about to loose a lot of their personal money along with their reputations. They own close to 75% of the company now or $3 B - we are not talking about chump change anymore even for the 2 of them.

 

It is a possibility that both of them have been lucky so far in their careers and the reason they have such large positions is only because of consistency bias and the fact Bruce has publicly committed to this idea.

 

The Sears saga continues - what else is new.

 

Well, I don't think it will ever go to $0. I think (if SYW doesn't work) Eddie will sooner or later stop the cash burn. The problem is that until that happens, value continues to be destroyed. So it may very well be that by that the time, after paying off all liabilities, the shareholders don't make much of a profit, if any. And given all the scenarios and the complexity, I would only invest if the returns are enormous.

 

Sure they are two smart guys, but over the course of history many smart people have made really dumb mistakes. Just look at Bill Ackman and Ron Johnson. They both had tons of capital at stake and Johnson was supposedly a retail expert. And then of course, there is the Michael Dell scenario. I'm not saying this is likely, but it has happened.

 

Eddie keeps insisting that SYW is working based on internal numbers, but it's hard to keep giving a benefit of a doubt quarter after quarter as losses keep piling up. The least management could do is acknowledge the problems and be more open, and maybe then I'd buy in again. But even there, it's a guessing game. So overall, it's too much speculation for me. It is certainly very challenging and fascinating, and I think those were (wrongly) some reasons why I had invested in the first place. But there are easier scenarios out there to understand, and that's where I'd rather have my money.

 

Re. Ron Johnson... What's the proof that he is a retail expert? I always think that selling iphone does not prove anything. Even a monkey can sell iphones during the Steve Jobs era. If Ron Johnson can sell millions of tons of shit year over year, that can prove something.  :)

[zenith]

agreed regarding Ron Johnson, he was NOT a turn around specialist. It was Steve Jobs that turned Apple around, not Ron Johnson. A better example would be Prem Watsa and John Chen, a CEO credited with turning around Sybase and perhaps now BBRY.

 

So why didn’t Johnson’s approach work at J.C. Penney? Johnson’s new strategy offended long-time customers, who were seeking discounts, and they left in droves — taking their business to Macy’s and Kohl’s and the Dollar Store. And the rebranding strategy didn’t work fast enough to attract the high-dollar customers who don’t care about finding the lowest price.

[Mephistopheles]

That's why I said supposedly. :P

 

Isn't he credited for fixing up Target's image?

[smj]

Under the terms of the rights offering, the Company is planning to distribute to its stockholders, at no charge, one transferable subscription right for every 85.1872 shares of the Company's common stock held of record as of 5:00 p.m., New York City time, on October 30, 2014, the previously announced record date. Each subscription right entitles the holder thereof to purchase, at a subscription price of $500, one unit, consisting of (a) a 8% senior unsecured note due 2019 in the principal amount of $500 and (b) 17.5994 warrants, with each warrant entitling the holder thereof to purchase one share of the Company's common stock. The warrants will be exercisable upon issuance at an exercise price of $28.41, the closing market price on October 17, 2014, the last trading day before the Company's board of directors approved the offering. The warrants will have a term of approximately five years and the exercise price will be payable either in cash or by surrendering notes issued in the rights offering. Fractional rights and fractional warrants will not be issued, and such fractional securities will be eliminated by rounding down. Upon the closing of the rights offering, the components of the units will immediately separate from one another such that the senior unsecured notes and warrants will constitute separate securities and will be transferable separately.

 

http://www.sec.gov/Archives/edgar/data/1310067/000119312514388201/d812339d424b5.htm

[Luke 532]

So, since shareholders get 1 right for every 85 shares held, would it make sense that the stock price should drop tomorrow by 1.17% (1/85) of whatever the rights trade at?  So, if the rights trade at, say, $100, then the stock would drop $1.17 (all else being equal).  Make sense?

[jeffmori7]

So, since shareholders get 1 right for every 85 shares held, would it make sense that the stock price should drop tomorrow by 1.17% (1/85) of whatever the rights trade at?  So, if the rights trade at, say, $100, then the stock would drop $1.17 (all else being equal).  Make sense?

 

No, because one right gives 17.599 warrants, so the dilution is 20% in 2019, am I right?

[Luke 532]

So, since shareholders get 1 right for every 85 shares held, would it make sense that the stock price should drop tomorrow by 1.17% (1/85) of whatever the rights trade at?  So, if the rights trade at, say, $100, then the stock would drop $1.17 (all else being equal).  Make sense?

 

No, because one right gives 17.599 warrants, so the dilution is 20% in 2019, am I right?

 

I don't think the warrant component will factor into the stock price until warrants are distributed at some point after the November 18th subscription deadline.  And given it's a full 5 years the dilution impact on the current stock price will likely be minimal, but I could be wrong about that.

[Mephistopheles]

For the SCC offering, what happens to the rights that are not exercised? Does the company just own a larger portion of SCC than it intended? Or do those who exercise get a bigger piece of the pie?

[jeffmori7]

So, since shareholders get 1 right for every 85 shares held, would it make sense that the stock price should drop tomorrow by 1.17% (1/85) of whatever the rights trade at?  So, if the rights trade at, say, $100, then the stock would drop $1.17 (all else being equal).  Make sense?

 

No, because one right gives 17.599 warrants, so the dilution is 20% in 2019, am I right?

 

I don't think the warrant component will factor into the stock price until warrants are distributed at some point after the November 18th subscription deadline.  And given it's a full 5 years the dilution impact on the current stock price will likely be minimal, but I could be wrong about that.

 

Ok. So you are expecting a slight drop because stock is worth more today including those rights embedded in its value than tomorrow, with no rights. Am I understanding you well?

[krazeenyc]

For the SCC offering, what happens to the rights that are not exercised? Does the company just own a larger portion of SCC than it intended? Or do those who exercise get a bigger piece of the pie?

 

Well those who exercise would have to oversubscribe to get more of the pie. (Ie buy more of the shares for $9.50).  if the offer is not fully subscribed SHLD will simply own more SRSC (than if would have it the offering was fully subscribed).

[krazeenyc]

So, since shareholders get 1 right for every 85 shares held, would it make sense that the stock price should drop tomorrow by 1.17% (1/85) of whatever the rights trade at?  So, if the rights trade at, say, $100, then the stock would drop $1.17 (all else being equal).  Make sense?

 

No, because one right gives 17.599 warrants, so the dilution is 20% in 2019, am I right?

 

Luke is right.  Whatever the rights trade for -- the stock should drop by 1/85 of that price. since the rights are like a dividend. So if rights are priced at $100 -- the stock will drop by $100/85.

 

The warrants will price -- after they are actually issued -- after people have already exercised and paid for their notes/warrants.

[Luke 532]

Ok. So you are expecting a slight drop because stock is worth more today including those rights embedded in its value than tomorrow, with no rights. Am I understanding you well?

 

Yes.

[Picasso]

SHLD will drop by the amount of the offering.  At $38 pre-offering there are roughly $5.5 dollars in rights.  All else equal SHLD will trade at $32.5.

 

The value of the bonds (sizable discount likely) plus the warrants will be a bit more than $5.5 dollars.  So some of that drop will be offset by the value of those assets.  But you have to calculate the value of the warrants on the $32.5 price not where it is today. 

 

Sears is pretty binary in 2019, so either there is dilution or no dilution.  So if you own the stock you have to assume there will be dilution (or else why own it at all?).

[Luke 532]

Luke is right.  Whatever the rights trade for -- the stock should drop by 1/85 of that price. since the rights are like a dividend. So if rights are priced at $100 -- the stock will drop by $100/85.

 

The warrants will price -- after they are actually issued -- after people have already exercised and paid for their notes/warrants.

 

Begs the question, anybody have a rough idea what the rights might trade at?

[krazeenyc]

SHLD will drop by the amount of the offering.  At $38 pre-offering there are roughly $5.5 dollars in rights.  All else equal SHLD will trade at $32.5.

 

The value of the bonds (sizable discount likely) plus the warrants will be a bit more than $5.5 dollars.  So some of that drop will be offset by the value of those assets.  But you have to calculate the value of the warrants on the $32.5 price not where it is today. 

 

Sears is pretty binary in 2019, so either there is dilution or no dilution.  So if you own the stock you have to assume there will be dilution (or else why own it at all?).

 

So you are arguing that the rights will trade at appx $467 each? IE. you'll have to pay $967 for the $500 Note and 17.6 warrants? Seems a bit pricey to me. You'd be pricing the warrants at $26.50 each AND assuming that people will want to pay face value for the 8% notes.  If the shares trade at $32.50 I don't think there will be any market for the warrants at $26.50.  I think your guess of $467 per right is too high.

[Picasso]

No, i don't think you're looking at it the right way.

 

The bonds will trade at a discount of maybe $85 dollars.  Since the rights are based on a 100% bond allocation that is worth about $468.  Plus the warrants will be worth whatever a 5 year call at $28.4 based on a $32.5 stock price (or something around there based on SHLD trading today).  I priced that around $12 dollars x 17.6 = $211. So sum of the two comes out to $680 dollars versus putting $500 in per $3200-3300 of SHLD stock you may own.

[krazeenyc]

No, i don't think you're looking at it the right way.

 

The bonds will trade at a discount of maybe $85 dollars.  Since the rights are based on a 100% bond allocation that is worth about $468.  Plus the warrants will be worth whatever a 5 year call at $28.4 based on a $32.5 stock price (or something around there based on SHLD trading today).  I priced that around $12 dollars x 17.6 = $211. So sum of the two comes out to $680 dollars versus putting $500 in per $3200-3300 of SHLD stock you may own.

 

What I was really trying to say is that if you think the note + warrants are worth $X. The value of the rights is X - 500.  And since it's like a dividend the stock will decrease by (X-500)/85.  (This is a better explanation than the mumbo jumbo I previously wrote which was the same thing using 10x the number of words).