SHLDQ - Sears Holdings Corp

[merkhet]

Alright, in last year's third quarter SHLD's cash burn was $1.042 billion. What's the over/under for this year?

 

Q2)  What's the over under on number of posts related to what the definition of 'cash burn' is?

 

:)

Defining ‘Cash Flow’ Burn

http://blog.searsholdings.com/shc-updates/defining-cash-flow-burn/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SHCSpeaks+%28SHC+Speaks%29

 

LOL

[Matson125]

You know what would be funny... if on Halloween the CFO came into the office dressed as a firefighter

[oddballstocks]

Alright, in last year's third quarter SHLD's cash burn was $1.042 billion. What's the over/under for this year?

 

Q2)  What's the over under on number of posts related to what the definition of 'cash burn' is?

 

:)

Defining ‘Cash Flow’ Burn

http://blog.searsholdings.com/shc-updates/defining-cash-flow-burn/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SHCSpeaks+%28SHC+Speaks%29

 

"HAHA, you guys think we're losing $2 billion a year, well guess what...WE'RE ONLY LOSING $1 BILLION, SO JOKES ON YOU!!"

 

It's like which is a worst Ford Pinto, the red or blue...doesn't matter both catch on fire.

 

The one asset that Sears clearly has is a good PR person.  They helped this guy turn a $1b cash loss into something that didn't seem so bad.  They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.  And they wrote that flim flam piece about how things are increasing.  The only thing increasing out of Sears is the amount of BS that they're producing, but let me say, the quality of that BS is spectacular.  If I could take a concentrated position in the editor of the blog's career I'd do it in a second.  They're going to do well, very well.

[ni-co]

Alright, in last year's third quarter SHLD's cash burn was $1.042 billion. What's the over/under for this year?

 

Q2)  What's the over under on number of posts related to what the definition of 'cash burn' is?

 

:)

Defining ‘Cash Flow’ Burn

http://blog.searsholdings.com/shc-updates/defining-cash-flow-burn/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SHCSpeaks+%28SHC+Speaks%29

 

"HAHA, you guys think we're losing $2 billion a year, well guess what...WE'RE ONLY LOSING $1 BILLION, SO JOKES ON YOU!!"

 

It's like which is a worst Ford Pinto, the red or blue...doesn't matter both catch on fire.

 

The one asset that Sears clearly has is a good PR person.  They helped this guy turn a $1b cash loss into something that didn't seem so bad.  They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.  And they wrote that flim flam piece about how things are increasing.  The only thing increasing out of Sears is the amount of BS that they're producing, but let me say, the quality of that BS is spectacular.  If I could take a concentrated position in the editor of the blog's career I'd do it in a second.  They're going to do well, very well.

 

Believe me, the one thing SHLD doesn't have is a good PR person. Your reaction is a good proof of that.

[Luke 532]

They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.

 

I fail to see how the rights offering was anything but a great opportunity.  Heck, even if somebody didn't own any shares they could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

And it's an absolute joke the effective price shareholders paid for each warrant if they, in turn, sold the bonds.  Less than $4 per warrant.

[Matson125]

Seritage has updated their website with new pictures and a few more details.

 

http://www.seritage.com/

 

 

Seritage surpasses more than 1,000,000 SF leased since its inception in 2012.

[oddballstocks]

They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.

 

I fail to see how the rights offering was anything but a great opportunity.  Heck, even if somebody didn't own any shares they could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

And it's an absolute joke the effective price shareholders paid for each warrant if they, in turn, sold the bonds.  Less than $4 per warrant.

 

You already owned all of this, but now you had to pony up cash for this "opportunity".  I agree if you look at this from the perspective of someone who wasn't a shareholder it's great.  But you're paying to buy what you already own, how is that good?

 

Imagine if you had a mortgage and the mortgage company sent you a note saying they were offering a new security on your house.  You could buy into these shares at a discount and get a bond on the house, a great deal.  Except you supposedly already own the house, so why this?

 

For those investors who are financially sophisticated and took advantage of this it could work out well.  But they just bilked shareholders for more cash.  They brag about liquidity, but it's at the expense of shareholders (especially ESL).  It's like someone in college bragging about how much money they have because every time their account drops below $1k due to careless spending their father deposits another $5k. 

 

Sears shareholders have one thing going for them.  ESL is tied to this ideal, to him his pride and reputation are on the line.  I have a feeling he'll throw a LOT of money into trying to save it before giving up.  Part of this investment is betting on the pride and arrogance of ESL, that's fine, but not a bet I want to take.

[ni-co]

Yes, there are definitely several ways to look at it. Though, if you've come anywhere near Greenblatt's first book, this was an incredible opportunity and I guess we might see something similar when it comes to the REIT rights offering.

[thepupil]

They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.

 

I fail to see how the rights offering was anything but a great opportunity.  Heck, even if somebody didn't own any shares they could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

And it's an absolute joke the effective price shareholders paid for each warrant if they, in turn, sold the bonds.  Less than $4 per warrant.

 

You already owned all of this, but now you had to pony up cash for this "opportunity".  I agree if you look at this from the perspective of someone who wasn't a shareholder it's great.  But you're paying to buy what you already own, how is that good?

 

Imagine if you had a mortgage and the mortgage company sent you a note saying they were offering a new security on your house.  You could buy into these shares at a discount and get a bond on the house, a great deal.  Except you supposedly already own the house, so why this?

 

For those investors who are financially sophisticated and took advantage of this it could work out well.  But they just bilked shareholders for more cash.  They brag about liquidity, but it's at the expense of shareholders (especially ESL).  It's like someone in college bragging about how much money they have because every time their account drops below $1k due to careless spending their father deposits another $5k. 

 

Sears shareholders have one thing going for them.  ESL is tied to this ideal, to him his pride and reputation are on the line.  I have a feeling he'll throw a LOT of money into trying to save it before giving up.  Part of this investment is betting on the pride and arrogance of ESL, that's fine, but not a bet I want to take.

 

I no longer have a position here, but I would love for all my stocks to "bilk" me for more cash in exchange for incredibly high IRR investment opportunities.

[Picasso]

70% implied volatility on a 5-year warrant.  Anyone seen this before on a 5-year warrant?  I was thinking this should be closer to 30-40%.

 

I realize there's a lot of buying pressure given the low liquidity on the warrants for the shorts, but is anyone able to get a short borrow on SHLDW?  I am curious if investors will be able to buy SHLD and short SHLDW as that spread narrows. 

[thepupil]

70% implied volatility on a 5-year warrant.  Anyone seen this before on a 5-year warrant?  I was thinking this should be closer to 30-40%.

 

I realize there's a lot of buying pressure given the low liquidity on the warrants for the shorts, but is anyone able to get a short borrow on SHLDW?  I am curious if investors will be able to buy SHLD and short SHLDW as that spread narrows.

 

have tried this before with BAC warrants and it didn't work because the borrow costs were pretty high. no borrow available at IB for SHLDW.

[Luke 532]

But you're paying to buy what you already own, how is that good?

 

Because by paying $4 for what one already owns they received back $20 without changing one's share count at all.  At the end of the day, the investor's share count is the exact same and they made a 5-bagger in a couple weeks on the money they put into the rights offering.

 

Imagine if you had a mortgage and the mortgage company sent you a note saying they were offering a new security on your house.  You could buy into these shares at a discount and get a bond on the house, a great deal.  Except you supposedly already own the house, so why this?

 

If I buy into it at less than $4 and can cash out at $20 a few weeks later, all the while still owning the house with the original mortgage terms and balance, then I would buy as much as I can of the offer.

[oddballstocks]

Luke posted a comment saying it was a 5 bagger on the warrants, but now the comment is deleted.

 

How is it a 5-bagger?  I just pulled up a quote, looks like warrants started to trade at $16.50 on the 19th SHLDW and trade at $20.85 now.  So yes, this was a great return that was quick.  But a 5-bagger?

 

I don't own Sears, how could I have purchased this for $4? I don't see that quote anywhere.

[krazeenyc]

They made the rights offerings that made shareholders invest more to keep what they owned seem like an opportunity.

 

I fail to see how the rights offering was anything but a great opportunity.  Heck, even if somebody didn't own any shares they could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

And it's an absolute joke the effective price shareholders paid for each warrant if they, in turn, sold the bonds.  Less than $4 per warrant.

 

The rights were very extremely undervalued while they traded -- especially relative to the price of the shares.  How undervalued -- there was a time on the day of the REIT announcement where you could have bought the rights and shorted the shares and guarantee yourself 8% (minus the cost to short sears for a month) -- by actually exercising the rights via trading in your bond. 

 

For the most part you could buy rights such that you were paying virtually no premium to the shares. IE. you were essentially buying a preferred stock that yielded roughly 6% -- with better downside than the equity, and the same upside -- for the same cost as buying the shares. (basically you could get 17.6 warrants + the note you could trade in to exercise them -- with no additional cash -- for the same cost as buying 17.6 shares on the open market)

 

The way I look at it, if you paid $170 for the rights and $500 for the note + warrants (which are now worth $800).  Your gain is really roughly 19% (very nice short term return).

[Luke 532]

Luke posted a comment saying it was a 5 bagger on the warrants, but now the comment is deleted.

 

How is it a 5-bagger?  I just pulled up a quote, looks like warrants started to trade at $16.50 on the 19th SHLDW and trade at $20.85 now.  So yes, this was a great return that was quick.  But a 5-bagger?

 

I don't own Sears, how could I have purchased this for $4? I don't see that quote anywhere.

 

Because we were talking about the sharholders that paid in to buy the rights. You paid $500, sold the bonds at 86.60 (or $433), so your cost is $67 for 17.6 warrants... or less than $4 per warrant.  Trading at $20 = 5-bagger.  I'm a retail investor and I did this.  It's not that sophisticated of an approach.

[thepupil]

Luke posted a comment saying it was a 5 bagger on the warrants, but now the comment is deleted.

 

How is it a 5-bagger?  I just pulled up a quote, looks like warrants started to trade at $16.50 on the 19th SHLDW and trade at $20.85 now.  So yes, this was a great return that was quick.  But a 5-bagger?

 

I don't own Sears, how could I have purchased this for $4? I don't see that quote anywhere.

 

he means net of the bonds. you got spun the rights, you exercised them and sold your bonds to create the warrants for $4 and they now trade for $20. That's not a five-bagger in my view because it's a leveraged stub position and you took more than $4 of risk (what if the bonds traded to $60?), but it is a high IRR opportunity created by Eddie. He effectively monetized the high volatility of SHLD (and reduced his own cost of borrowing) by giving a shareholders a right to lend to them with a warrant sweetener. the real losers are those paying 60% of the common's price for a warrant right now, not getting borrow fees and getting very little real leverage. it was a brilliant piece of financial engineering and why I follow eddie.

[Picasso]

As someone who also participated by buying up the rights in the market, I think you have to consider the total risk for the capital one had to put up.  For every $160, $500 was held in bonds and warrants which could fluctuate by quite a bit.  The $160 was really levered to the entire value of the purchase so I don't know if I would consider the returns independent of one another.  The warrants could end up at $12 because SHLD goes down or implied volatility was too low or the bonds could have traded for a big discount.  A lot of other scenarios could have played out.

 

On a total return it wasn't a bad investment when you add up the subscription cost and cost of the rights.

[Luke 532]

As someone who also participated by buying up the rights in the market, I think you have to consider the total risk for the capital one had to put up.  For every $160, $500 was held in bonds and warrants which could fluctuate by quite a bit.  The $160 was really levered to the entire value of the purchase so I don't know if I would consider the returns independent of one another.  The warrants could end up at $12 because SHLD goes down or implied volatility was too low or the bonds could have traded for a big discount.  A lot of other scenarios could have played out.

 

On a total return it wasn't a bad investment when you add up the subscription cost and cost of the rights.

 

I agree.  I was just trying to make the point that exercising the rights was a really, really good deal.

[oddballstocks]

As someone who also participated by buying up the rights in the market, I think you have to consider the total risk for the capital one had to put up.  For every $160, $500 was held in bonds and warrants which could fluctuate by quite a bit.  The $160 was really levered to the entire value of the purchase so I don't know if I would consider the returns independent of one another.  The warrants could end up at $12 because SHLD goes down or implied volatility was too low or the bonds could have traded for a big discount.  A lot of other scenarios could have played out.

 

On a total return it wasn't a bad investment when you add up the subscription cost and cost of the rights.

 

I agree.  I was just trying to make the point that exercising the rights was a really, really good deal.

 

 

Right, so as a shareholder you took advantage of this.  But one would need to buy the shares to to take advantage right?  As thepupil point out this worked out well, but in a sense it's better to be lucky than good.

 

Glad you made 5x your money, seeing as how you were at a loss on your SHLD position hopefully you're back to even, or went in heavy on these and have a gain.

[Luke 532]

Right, so as a shareholder you took advantage of this.  But one would need to buy the shares to to take advantage right?

 

No, those that never owned a single share would have done very well.  One could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

[krazeenyc]

As someone who also participated by buying up the rights in the market, I think you have to consider the total risk for the capital one had to put up.  For every $160, $500 was held in bonds and warrants which could fluctuate by quite a bit.  The $160 was really levered to the entire value of the purchase so I don't know if I would consider the returns independent of one another.  The warrants could end up at $12 because SHLD goes down or implied volatility was too low or the bonds could have traded for a big discount.  A lot of other scenarios could have played out.

 

On a total return it wasn't a bad investment when you add up the subscription cost and cost of the rights.

 

I agree.  I was just trying to make the point that exercising the rights was a really, really good deal.

 

 

Right, so as a shareholder you took advantage of this.  But one would need to buy the shares to to take advantage right?  As thepupil point out this worked out well, but in a sense it's better to be lucky than good.

 

Glad you made 5x your money, seeing as how you were at a loss on your SHLD position hopefully you're back to even, or went in heavy on these and have a gain.

 

No. You didn't need to own shares. You could have bought the rights on the open market -- they were mispriced.

[adesigar]

No. You didn't need to own shares. You could have bought the rights on the open market -- they were mispriced.

 

Yes they were mispriced. I like to thank all the Bears and Shorts.

First they mispriced the Sears Canada shares.

Then they mispriced the Sears Canada rights

Then they mispriced the Sears rights.

 

What I did was to sell the shares I had and buy rights + keep cash for the rights.

 

So I didn't get the pricing for Sears Canada. Now I don't get the pricing of SHLDR.

 

I can sell 17.6 shares of SHLD for 670 and I can buy SHLDR rights for $170+$500 which give me exactly 17.6 shares and give me the equivalent of a 6% dividend for 5 years on the exact same money I had in the SHLD shares. Am I crazy or am I missing something?

 

BTW I already made the switch from SHLD to SHLDZ+Cash. Don't know if im cuckoo or the market is.

I had mistyped SHLDR instead of SHLDZ

 

I am keeping my fingers crossed hoping the Bears/Shorts misprice the REIT spinoff.

[heth247]

Right, so as a shareholder you took advantage of this.  But one would need to buy the shares to to take advantage right?

 

No, those that never owned a single share would have done very well.  One could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

How many people can do this in a massive scale?  As for me, I could not even sell my bonds in Scottrade for now.

 

[thepupil]

Right, so as a shareholder you took advantage of this.  But one would need to buy the shares to to take advantage right?

 

No, those that never owned a single share would have done very well.  One could have bought rights on the open market for $170, exercised for an additional $500, sell the bonds at 86.60, and keep the warrants.  The result would already yield ~50% gain.

 

$500 par value * 0.8660 = $433

($170 + $500 - $433) / 17.6 = $13.47 (now trading > $20.00, or ~50%).

 

Luke, was there a lag between the exercise of the rights and when you knew what you could sell the bonds for? Because, in my humble opinion, your denominator is off. a non-SHLD shareholder purchased the rights for $170, then put up $500, risking $670.

 

So outlay = $670

Proceeds = 1 bond (which turned out to be worth $433) + 17.6 Warrants (which turned out to be worth $20) = $785

 

$785 / $670 = 17%, a very good return and in a very short period of time. But a securities operator that did this risked $670 and that is the denominator.

 

Is my interpretation correct? There was not clarity on where the bonds or warrants would trade and at one point the operator had outlaid $670. Of course the adept operator could use market inputs (like implied vol on SHLD options and the current pricing of SHLD's unsecured debt, but this is sears and things are uncertain) to guess where things would shake out and those who did made money and earned their profit. But I don't really see the 50% or 5 bagger return you do.

 

I did not do this trade and don't feel like looking up when the bonds started trading versus when you could buy the rights and stuff.

 

 

[Luke 532]

Luke, was there a lag between the exercise of the rights and when you knew what you could sell the bonds for? Because, in my humble opinion, your denominator is off. a non-SHLD shareholder purchased the rights for $170, then put up $500, risking $670.

 

Yes, you're correct.  Nobody knew what the warrants and bonds would trade at.  But based on the volatility, intrinsic value, etc. the warrants were likely going to trade anywhere from $12-$22 with $17 being a reasonable guess.  And given the other bonds that are similar I was fairly confident they would trade at or above high-70's (thanks to a handful of people on this board that know more about bonds than I ever will).  So, technically speaking, one had to risk $670.  I was comfortable with that risk.