SHLDQ - Sears Holdings Corp

[wisdom]

Bruce could be raising cash in anticipation of Fed tapering. He probably expects a lot more opportunities going forward and thus, more use for the cash.

[JRH]

I am super disappointed with Fairholme opening the fund again. There was something special about FAIRX's incredible history and Bruce Berkowitz defiantly saying no to short term owners and going through that bad patch ever again. I thought he was opening a special vehicle or making FAIRX a limited partnership. Too bad because his decision to reverse a few months later seems absurd. If he really wants to up the bet on Fannie and Freddie why can't he just shift funds around and sell the smaller names and use that to buy more of what he likes?

 

I'm not sure if he's being inconsistent or if he just has his particular principles... Being half of FAIRX, it sure seems that AIG might be a good candidate for trimming in order to raise cash for more Fannie/Freddie, but that's just me.  Maybe he doesn't want to trigger capital gains distributions if he can help it.

 

It is notable that it is just FAIRX re-opening and not Income or Allocation.  I'm not sure exactly what it means.  Income clearly has more cash than it needs but I'm not sure about Allocation.  The capital gains theory is inconclusive, I think, along those lines.

[FCharlie]

I sometimes wonder if Fairholmes accumulation of SHLD ever pissed ESL off...

 

I mean it is in opposition to ESL's goal to own as much stock as he can, and who is this fly in the ointment coming around every quarter and sucking away another million stock certificates.

 

I sometimes wonder if Fairholmes accumulation of SHLD is intended to piss ESL off!

 

 

[compoundinglife]

 

 

If float is 25.5M (I think it's a little less actually), short interest is >55% of the float.

 

VW, TSLA... SHLD

 

 

You know, waiting for a great VW style squeeze in SHLD is sort of like waiting for the Great Pumpkin to rise up out of the pumpkin patch. 

 

I think the smarter strategy is to sell both puts & calls and take advantage of the insane premiums on both.  This has been the correct strategy for years. If you get put the stock, just sell calls until Eddie Lampert files a form 4 showing he's made yet another purchase of SHLD shares or until they sell a few stores for a few hundred million dollars, then the stock soars. If you get called out of your shares, just sell puts until the next disappointing earnings report comes out, usually every three months.

 

Jim Gillies from the Motley Fool presented a SHLD options arb idea at CGI Las Vegas in 2009. It was a "short box". Basically buy a lower value put, a higher value call and write a call at the strike of the put you purchased and write a put at the price of the call you purchased (all at the same expiration of course). It ended up with a guaranteed net credit at expiration regardless of the share price. I will see if I can dig up the slide deck. Apparently at the time it was not uncommon for the put call parity to be out of whack, I believe the explanation was that since the stock was so difficult to short there were way more puts trading hands because of synthetic shorts so the puts were too expensive relative to the calls. Not sure if that is still the case these days.

[Luke 532]

 

 

If float is 25.5M (I think it's a little less actually), short interest is >55% of the float.

 

VW, TSLA... SHLD

 

You know, waiting for a great VW style squeeze in SHLD is sort of like waiting for the Great Pumpkin to rise up out of the pumpkin patch. 

 

Or it's like waiting for so long for the Red Sox to finally win the World Series.  There were times when I never thought it would happen, but when it did it was more awesome than I had ever imagined.  It helped that I got to experience in person Game 6 of the ALCS in enemy territory up in New York (the "bloody sock" game).

 

There may be a long wait for any major squeeze, but if operating results continue to be poor and the major holders don't sell... there will be a squeeze.

 

On the other hand, if operating results improve then the stock price will rise on its own without any need for a squeeze as shorts will cover as they notice SHLD improving.

 

So, the downside risk in a long-term investment in SHLD is continued bad results.  Ironically, this could cause the squeeze to be more severe and give anybody that wants to exit a nice profit (depending, of course, on their entry price).  Or on any huge squeeze one could buy puts above their entry on the stock and protect against any losses.

[Luke 532]

What's the balance between owned and leased buildings?

What percentage of liabilities comes from those leases?

 

If both these numbers were high enough and enough buildings were sub-leased, that would have quite an impact as the company would get a double advantage. When done in size this would have a material influence on the value of the equity given how leveraged SHLD is.

 

Q1: 37% owned at last check, 63% leased.

Q2: Does anybody know this answer... what percentage of liab comes from the leases?

[Luke 532]

Also, how many stores have been closed in the last 10-15 years? Does anyone have data on this? From these last few pages I got the idea that things have been moving along a bit faster lately but is there any concrete evidence of this when comparing to the past?

 

See attached chart.

[Luke 532]

New Concept Sears Outlet Store to Open on Ludwig Drive in Fairview Heights

 

http://www.heraldpubs.com/articles/2013/08/16/fairview/doc520e3d16de20f410391249.txt

[alertmeipp]

anyone know how i can put a thread to ignore? ;D

[Liberty]

anyone know how i can put a thread to ignore? ;D

 

Don't click on it?  ;)

[ERICOPOLY]

It looks like Baker Street also had a big chunk of common.

 

They formed in 2009.  What's their history before that?

 

Is this the same Baker Street?

http://www.bakerstreetcapital.com/

 

Yeah, I believe that's the site. From what I know, it's ran by Vadim Perelman. He left Force Capital in 2009.  He's a pretty young guy. Around 31 or so I think.

 

Force Capital just reported a sale of 86% of their SHLD holding.  So his prior employer was getting out just as he was getting in.  They sold 3.9 million shares and he bought 1.5 million.

[Matson125]

It looks like Baker Street also had a big chunk of common.

 

They formed in 2009.  What's their history before that?

 

Is this the same Baker Street?

http://www.bakerstreetcapital.com/

 

Yeah, I believe that's the site. From what I know, it's ran by Vadim Perelman. He left Force Capital in 2009.  He's a pretty young guy. Around 31 or so I think.

 

Force Capital just reported a sale of 86% of their SHLD holding.  So his prior employer was getting out just as he was getting in.  They sold 3.9 million shares and he bought 1.5 million.

 

Eric do you have a link? 

[ASTA]

just bought a 10% stake today. I which everyone luck :D

[ERICOPOLY]

It looks like Baker Street also had a big chunk of common.

 

They formed in 2009.  What's their history before that?

 

Is this the same Baker Street?

http://www.bakerstreetcapital.com/

 

Yeah, I believe that's the site. From what I know, it's ran by Vadim Perelman. He left Force Capital in 2009.  He's a pretty young guy. Around 31 or so I think.

 

Force Capital just reported a sale of 86% of their SHLD holding.  So his prior employer was getting out just as he was getting in.  They sold 3.9 million shares and he bought 1.5 million.

 

Eric do you have a link?

 

I'm just repeated what is mentioned here:

 

http://www.nasdaq.com/symbol/shld/institutional-holdings

 

[Luke 532]

Wonder if Force Capital still has 28% of their portfolio in SHLD calls?

 

http://whalewisdom.com/filer/force-capital-management-llc

[JAllen]

Force Capital still has 4.73M call options and 639,000 shares.

 

http://www.sec.gov/Archives/edgar/data/1317601/000117266113001202/xslForm13F_X01/infotable.xml

 

This is actually a large increase from the first quarter when they only owned 400,000 shares outright. 

[Matson125]

It looks like Baker Street also had a big chunk of common.

 

They formed in 2009.  What's their history before that?

 

Is this the same Baker Street?

http://www.bakerstreetcapital.com/

 

Yeah, I believe that's the site. From what I know, it's ran by Vadim Perelman. He left Force Capital in 2009.  He's a pretty young guy. Around 31 or so I think.

 

Force Capital just reported a sale of 86% of their SHLD holding.  So his prior employer was getting out just as he was getting in.  They sold 3.9 million shares and he bought 1.5 million.

 

Eric do you have a link?

 

I'm just repeated what is mentioned here:

 

http://www.nasdaq.com/symbol/shld/institutional-holdings

 

Thanks Eric.  The SEC site shows Force has actually increased their position

13F as of March 31, 2013

411,719 shares

4,124,200 calls

http://www.sec.gov/Archives/edgar/data/1317601/000131760113000004/a201303-13f_hr.txt

 

 

13F as of June 30, 2013

639,390 shares

4,730,000 calls

http://www.sec.gov/Archives/edgar/data/1317601/000117266113001202/xslForm13F_X01/infotable.xml

[ERICOPOLY]

It looks like Baker Street also had a big chunk of common.

 

They formed in 2009.  What's their history before that?

 

Is this the same Baker Street?

http://www.bakerstreetcapital.com/

 

Yeah, I believe that's the site. From what I know, it's ran by Vadim Perelman. He left Force Capital in 2009.  He's a pretty young guy. Around 31 or so I think.

 

Force Capital just reported a sale of 86% of their SHLD holding.  So his prior employer was getting out just as he was getting in.  They sold 3.9 million shares and he bought 1.5 million.

 

Eric do you have a link?

 

I'm just repeated what is mentioned here:

 

http://www.nasdaq.com/symbol/shld/institutional-holdings

 

Thanks Eric.  The SEC site shows Force has actually increased their position

13F as of March 31, 2013

411,719 shares

4,124,200 calls

http://www.sec.gov/Archives/edgar/data/1317601/000131760113000004/a201303-13f_hr.txt

 

 

13F as of June 30, 2013

639,390 shares

4,730,000 calls

http://www.sec.gov/Archives/edgar/data/1317601/000117266113001202/xslForm13F_X01/infotable.xml

 

Nice.  Okay, I'm joining the chorus of people burned by 3rd party reporting.

[Luke 532]

It will be a pleasant surprise if Force Capital and Baker Street turn out to be truly long-term holders, as that would be a good chunk of shares that we can remove from the float.

 

Anybody short SHLD must not be factoring in that Lampert, Berkowitz, Tisch (maybe others?) highly likely won't sell shares anywhere close to the current price.

[Grenville]

A question for some of you: How come SHLD doesn't release separate financials for the senior secured 2018 notes? I looked back to when they offered the notes and couldn't find financials. I know they have the parent, guarantor, non-guarantor split in the 10Ks and 10Qs, but if I was a senior note holder I would want something a bit clearer to understand what backs up my debt. The details at the end in the 10Ks and 10Qs doesn't seem adequate.

 

Is the reason separate financials don't exist because the senior note holders are comfortable with the fact that the inventory and receivables are there's first?

 

Curious....

[Luke 532]

Sears redefines its shopping experience

http://www.northbaynipissing.com/2013/08/sears-redefines-its-shopping-experience/

[Grenville]

Another thing I noticed when looking at the guarantor/non-guarantor stuff is that all the stock buybacks done in 2009, 2010, 2011 were done through the guarantor subs.

 

If I understand things right, in the event of a bankruptcy of the guarantor subs, they would have equity in the parent and the non guarantor sub through the treasury stock they hold in the parent. They could sell that to fund claims and generate funds.

 

It would be nice if there were better financials for the guarantor sub.

 

A question for some of you: How come SHLD doesn't release separate financials for the senior secured 2018 notes? I looked back to when they offered the notes and couldn't find financials. I know they have the parent, guarantor, non-guarantor split in the 10Ks and 10Qs, but if I was a senior note holder I would want something a bit clearer to understand what backs up my debt. The details at the end in the 10Ks and 10Qs doesn't seem adequate.

 

Is the reason separate financials don't exist because the senior note holders are comfortable with the fact that the inventory and receivables are there's first?

 

Curious....

[constructive]

If I understand things right, in the event of a bankruptcy of the guarantor subs, they would have equity in the parent and the non guarantor sub through the treasury stock they hold in the parent. They could sell that to fund claims and generate funds.

 

I don't think this is true.

 

http://en.wikipedia.org/wiki/Treasury_stock

"A company cannot own itself. The possession of treasury shares does not give the company the right to vote, to exercise preemptive rights as a shareholder, to receive cash dividends, or to receive assets on company liquidation. Treasury shares are essentially the same as unissued capital and no one advocates classifying unissued share capital as an asset on the balance sheet, as an asset should have probable future economic benefits. Treasury shares simply reduce ordinary share capital."

[Grenville]

If I understand things right, in the event of a bankruptcy of the guarantor subs, they would have equity in the parent and the non guarantor sub through the treasury stock they hold in the parent. They could sell that to fund claims and generate funds.

 

I don't think this is true.

 

http://en.wikipedia.org/wiki/Treasury_stock

"A company cannot own itself. The possession of treasury shares does not give the company the right to vote, to exercise preemptive rights as a shareholder, to receive cash dividends, or to receive assets on company liquidation. Treasury shares are essentially the same as unissued capital and no one advocates classifying unissued share capital as an asset on the balance sheet, as an asset should have probable future economic benefits. Treasury shares simply reduce ordinary share capital."

 

I can understand the logic if it's the parent that owns treasury stock in itself, but here it's a subsidiary that owns stock in the parent. You might still be correct, but I think the distinction of a subsidiary owning stock makes it different.

 

So does it mean the guarantor can buy back stock with all its capital and the debt holders have no recourse to the treasury stock? It's an effective way to dividend capital out of the guarantor sub to the parent since there are less shares of the parent outstanding.

[Luke 532]

So far I can't talk myself into selling out.  The part about where Eddie claims that net inventory liquidation is funding the store closures is... I believe... just trying to get the message out that closing stores doesn't immediately threaten them.  I can't find another reason why he'd phrase it that way.  This way you could close stores and not be desperate to sell the underlying real estate -- closing the stores does not put a cash pinch on the company that would make them a distressed real estate seller.  It's a good message now that I think of it.

 

It's a very good message.  If SHLD can just sit on the real estate of closed stores and not lose much money as time goes by, then they can wait for the real estate market to continue to improve prior to leasing it or selling it.  It kills much of the risk of Lampert not moving fast enough.