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The subscription right entitles the holder to buy one half of one common share of Seritage for each share of Sears Holdings common stock for $29.58 per whole share
"UPDATE: I got a note from a financial professional telling me that Seritage rights were distributed to shareholders today. The upshot, he said, is that Sears is trading as if it just paid a dividend, with the value of the rights coming out of Sears’ shares. The rights closed at $5.66 today, so, he says, Sears shares were actually close to unchanged on the day. Comments below suggest the same thing. Bloomberg says they were down 12%. FactSet (and Google. And Yahoo.) says they’re down 19%. I admit I am at a loss. I’ll try to figure it out and get back to you."
My opinion on Sears and Lampert's attempt to turn a large company into an experiment in financial engineering haven't changed.
The REIT bs will give Sears more time to throw more money down the drain while we all listen to delusional discussions of a turnaround based around a membership program that doesn't charge a fee.
The whole thing is going to be a really dismaying financial case study when it's all said and done.
Berkowitz is wrong, too just as I said he was when I wondered why in the world he was buying Sears when it was over $100.
@Charles I thought of pinging you on this, I know that you too are a long suffering FAAFX shareholder.
@Scott, thanks for explaining what happened to the share price today, that made sense. So presumably in very soon FAAFX and FAIRX should tick up when they get the "dividend."
It's going to be a case study one way or the other, Berkowitz is either going to look like a prophet or an idiot who was too stubborn to cut his losses. And even if he is just early, to be that early (he started buying Sears for FAIRX in 2005) is enough to qualify as wrong is my book.
Charles, you holding? I am for now. But FAIRX and FAAFX (I own both) are defintely funds I'm going to sell when I feel it's time to cut back on equities.
Re: Sears, I don't think what happens to the share price even matters any more. Lampert owns half, Berkowitz a quarter, they can't possibly sell, they've either got to liquidate the company or get it paying dividends.
"Lampert owns half, Berkowitz a corner, they can't possibly sell, they've either got to liquidate the company or get it paying dividends."
Float: 13.99M Shares Short (as of May 15, 2015)3: 10.67M
If this goes wrong for Berkowitz/Lampert, it gets interesting really quickly.
"And even if he is just early, to be that early (he started buying Sears for FAIRX in 2005) is enough to qualify as wrong is my book."
Yep.
I mean, look at Fairholme's case study - the comparison of square footage between SHLD and companies like Simon doesn't really take into much account the quality (or lack of) of a lot of Sears/K-Mart real estate. A comparison to Simon is just not realistic from the standpoint of Simon is an exceptional operator of carefully selected mall real estate. As much as I really don't have a very positive opinion on the future of malls and the overbuilt state of retail in America, I'll say there is no better operator of malls than Simon Properties. So we're comparing a class A mall operator to an increasingly irrelevant retailer who has abandoned quite a few stores and had one cited for urban blight? (http://www.sfgate.com/bayarea/article/Oakland-Sears-still-hasn-t-repaired-windows-5035945.php#photo-5548042/)
"For years, SHC has remained a misunderstood sum-of-parts story"
No, Bruce - I understand just fine - it's an arrogant hedge fund manager who has turned a major company and a classic American brand into a financial experiment where he couldn't give a crap about the underlying company.
Berkowitz admitted as such - “Sears does just enough, so they're not breaking the terms of their very long lease.” (We're not going to improve the business, we're going to neglect it for years and then wonder why it's losing more and more money and relevance by the day? Huh, ok.)
"Shareholder class action lawsuit has been filed against Sears Holdings alleging the company's plan to sell its prime real estate holdings to a trust controlled by CEO Eddie Lampert would strip the struggling retailer of one of its last remaining valuable assets, leaving it a debt-laden, money-losing renter in its own stores.
The proposed $2.5 billion sale, the suit says, will benefit Lampert at the expense of shareholders and hasten the demise of Sears, once a quintessential American retailer.
"The proposed transaction is a financially and structurally unfair deal," the lawsuit says. "Sears and its stockholders would receive a severely inadequate cash payment that the defendant Lampert-controlled company may use to cover operating losses and debt obligations for another year or so, before stockholders are left holding the bag in an insolvency widely viewed as inevitable if the proposed transaction occurs."
LOL, even the Kardashians want nothing to do with Sears anymore.
Maybe they're selling back and forth to each other because I can't imagine who else would want them. It seems as crazy to me as buying shares in the Titanic after it hit the iceberg.
Mr. Berkowitz seems incapable of admitting that he has made a mistake and frankly his reliability/expertise in the land/REIT business (see St.Joe's) is horrendous. Glad I swapped out at the beginning of the year.
"Maybe they're selling back and forth to each other..."
Interesting way to pull profits from a stock price without changing the net number of shares owned. Here's some recent insider transactions. Just wonder if shareholders are drinking Kool-aid while Bruce and Eddy share the milk.
This whole situation has been bizarre. Sears is being run into the ground by their hedge fund owner/operate Eddie Lampert. He doesn't seem to be able to remove his ego from the whole situation and thinks he can take a fledgling brand and turn it into a competitive entity without any prior retail experience.
I think that a lot of people thought Lampert would use SHLD like Buffett uses BRK. That is, use the cash flows from the holding company and buy lots of complimentary companies that were good companies. But he hasn't done that. He's spent more time trying to operate and turn around SHLD than he has being the value stock picker that everyone thought he was.
Years ago, when Eddie Lambert took over Sears, Jim Cramer said Lambert was a genius and that everyone should buy at least one share of Sears to get rich. For that matter, Morningstar recommended St Joe, and that didn’t work out so well either.
What I'm trying to figure out is, if everyone and his brother can see that Sears is close to worthless, and if Lampert and Berkowitz are by any account smart guys with a history of investment success, why don't they see it? Or maybe they do see the stuff that's obvious to part-time investors getting their information off the web, and they also see something else less obvious that the rest of us don't?
That's my hope, anyway. I'm holding on to my FAIRX and FAAFX shares. But my faith -- and sometimes I fear that it is no more than faith -- is wavering.
They always talk about the value of the real estate but even that is questioned at times. I get the feeling they are milking Sears for all it has and when their done, nothing will be left.
From the 247wallst.com article posted above "Fairholme Capital Management bought 305,000 shares of the iconic retailer’s stock at prices that fell in a wide range from $29.67 all the way up to $39.00. The total for the buy came to $10.5 million. Shares closed trading on Friday at $28.07."
So what am I missing here in terms of "milking Sears for all it has"? By the looks of it Fairholme lost money on every single trade. I should have gone to investing school.
They've both got so many shares I wouldn't put too much weight into a few hundred thousand. Maybe Bruce was selling to meet redemptions in his funds, since a lot of fundholders are selling, and then he bought back a bit more when prices dropped again.
As a Fairholme shareholder, I don't care how this investment makes money, so long as it does, eventually.
As an American, I am disturbed at the collapse of a once-great retail chain that still gives jobs to many.
@John Chisum: "whenever it happens. I don't believe their will be anything left of Sears." Not true, because they have the top ten advantage. Regards, Ted
Selling to meet redemptions, hmmmm..... Could be true. When Fairholme opened their two sister funds I seem to recall that FAIRX was sitting at $20B in assets. At the start of this year I thought it was around $9B. Now M* has it at $5.5B. Berkowitz might have been better off filling warehouses with Kenmore appliances and Craftsman tools.
And John, I knew that. Just the whole situation boggles my mind. Maybe like Sandborn at Oakmark, Berkowitz will eventually be proven right but he sure knows how to test his shareholders. Maybe he will announce a hard closing of his fund(s).
"So what am I missing here in terms of "milking Sears for all it has"? "
I was not speaking of their method but rather the end game, whenever it happens. I don't believe their will be anything left of Sears.
I'll agree with that. They're spinning off as much as they can while they can it seems, although much of what's been spun-off has been revealed to be junky - OSH is gone and SHOS (which is heavily reliant on the parent) has been obliterated. The REIT is more than a little unappealing.
I do miss Craftsman's tools. Now they are all Markita and DeWalt. As such, I have no interest in Fairholme funds while BRK.B has done very well in the same time period (no drama).
From a transcript of the conference call earlier this year:
Bruce Berkowitz: "We’ve stayed the course under pressure. However, sadly, not all shareholders have had the courage required at bottoms. We hope our current shareholders share the same long-term focus we do. "
There is indeed a time limit on success as far as the shareholder goes. How long do you hold a losing fund before you pull the plug? Bruce is hoping the new shareholders share his vision, or stay the course long enough that his bet on Sears turns the corner. Problem with that IMO is that each cycle of shareholders becomes less and less patient.
They always talk about the value of the real estate but even that is questioned at times. I get the feeling they are milking Sears for all it has and when their done, nothing will be left.
Comments
The subscription right entitles the holder to buy one half of one common share of Seritage for each share of Sears Holdings common stock for $29.58 per whole share
http://blogs.barrons.com/stockstowatchtoday/2015/06/10/sears-how-to-give-back-all-your-gains-in-just-four-trading-days/
"UPDATE: I got a note from a financial professional telling me that Seritage rights were distributed to shareholders today. The upshot, he said, is that Sears is trading as if it just paid a dividend, with the value of the rights coming out of Sears’ shares. The rights closed at $5.66 today, so, he says, Sears shares were actually close to unchanged on the day. Comments below suggest the same thing. Bloomberg says they were down 12%. FactSet (and Google. And Yahoo.) says they’re down 19%. I admit I am at a loss. I’ll try to figure it out and get back to you."
My opinion on Sears and Lampert's attempt to turn a large company into an experiment in financial engineering haven't changed.
Oooh, they're spinning off a REIT - of Sears stores! "Sears now has an additional $153 million in rent payments each year plus is forgoing $16 million per year (initially) in third-party rent payments." (http://seekingalpha.com/article/3217036-sears-holdings-seritage-rights-offering-draws-nearer)
The REIT bs will give Sears more time to throw more money down the drain while we all listen to delusional discussions of a turnaround based around a membership program that doesn't charge a fee.
The whole thing is going to be a really dismaying financial case study when it's all said and done.
Berkowitz is wrong, too just as I said he was when I wondered why in the world he was buying Sears when it was over $100.
@Scott, thanks for explaining what happened to the share price today, that made sense. So presumably in very soon FAAFX and FAIRX should tick up when they get the "dividend."
It's going to be a case study one way or the other, Berkowitz is either going to look like a prophet or an idiot who was too stubborn to cut his losses. And even if he is just early, to be that early (he started buying Sears for FAIRX in 2005) is enough to qualify as wrong is my book.
Charles, you holding? I am for now. But FAIRX and FAAFX (I own both) are defintely funds I'm going to sell when I feel it's time to cut back on equities.
Re: Sears, I don't think what happens to the share price even matters any more. Lampert owns half, Berkowitz a quarter, they can't possibly sell, they've either got to liquidate the company or get it paying dividends.
Float: 13.99M
Shares Short (as of May 15, 2015)3: 10.67M
If this goes wrong for Berkowitz/Lampert, it gets interesting really quickly.
"And even if he is just early, to be that early (he started buying Sears for FAIRX in 2005) is enough to qualify as wrong is my book."
Yep.
I mean, look at Fairholme's case study - the comparison of square footage between SHLD and companies like Simon doesn't really take into much account the quality (or lack of) of a lot of Sears/K-Mart real estate. A comparison to Simon is just not realistic from the standpoint of Simon is an exceptional operator of carefully selected mall real estate. As much as I really don't have a very positive opinion on the future of malls and the overbuilt state of retail in America, I'll say there is no better operator of malls than Simon Properties. So we're comparing a class A mall operator to an increasingly irrelevant retailer who has abandoned quite a few stores and had one cited for urban blight? (http://www.sfgate.com/bayarea/article/Oakland-Sears-still-hasn-t-repaired-windows-5035945.php#photo-5548042/)
"For years, SHC has remained a misunderstood sum-of-parts story"
No, Bruce - I understand just fine - it's an arrogant hedge fund manager who has turned a major company and a classic American brand into a financial experiment where he couldn't give a crap about the underlying company.
Berkowitz admitted as such - “Sears does just enough, so they're not breaking the terms of their very long lease.” (We're not going to improve the business, we're going to neglect it for years and then wonder why it's losing more and more money and relevance by the day? Huh, ok.)
(http://www.investmentnews.com/article/20120918/BLOG06/120919939)
There's also a class action shareholder lawsuit against Lampert - shareholders waking up to the idea that Eddie is playing "heads I win, tails I win."
http://www.chicagotribune.com/business/breaking/ct-sears-0602-biz-20150601-story.html
"Shareholder class action lawsuit has been filed against Sears Holdings alleging the company's plan to sell its prime real estate holdings to a trust controlled by CEO Eddie Lampert would strip the struggling retailer of one of its last remaining valuable assets, leaving it a debt-laden, money-losing renter in its own stores.
The proposed $2.5 billion sale, the suit says, will benefit Lampert at the expense of shareholders and hasten the demise of Sears, once a quintessential American retailer.
"The proposed transaction is a financially and structurally unfair deal," the lawsuit says. "Sears and its stockholders would receive a severely inadequate cash payment that the defendant Lampert-controlled company may use to cover operating losses and debt obligations for another year or so, before stockholders are left holding the bag in an insolvency widely viewed as inevitable if the proposed transaction occurs."
LOL, even the Kardashians want nothing to do with Sears anymore.
http://www.chicagotribune.com/business/ct-kardashian-kollection-sears-0506-biz-20150505-story.html
"Lampert owns half, Berkowitz a corner, they can't possibly sell, they've either got to liquidate the company or get it paying dividends."
Whose selling shares and driving the price down if 75% of stock is locked up by two owners who I assume are not sellers...or are they?
Mr. Berkowitz seems incapable of admitting that he has made a mistake and frankly his reliability/expertise in the land/REIT business (see St.Joe's) is horrendous. Glad I swapped out at the beginning of the year.
Here's Bruce Buying over the last few days:
Here's Bruce selling over the last few months:
I think that a lot of people thought Lampert would use SHLD like Buffett uses BRK. That is, use the cash flows from the holding company and buy lots of complimentary companies that were good companies. But he hasn't done that. He's spent more time trying to operate and turn around SHLD than he has being the value stock picker that everyone thought he was.
Very strange situation.
That's my hope, anyway. I'm holding on to my FAIRX and FAAFX shares. But my faith -- and sometimes I fear that it is no more than faith -- is wavering.
http://247wallst.com/investing/2015/06/13/insider-buying-surges-as-volatile-market-presents-buying-opportunity/
Check out the next page on the table. They were selling a lot earlier this year. Now their buying them back?
http://www.nasdaq.com/symbol/shld/insider-trades
They always talk about the value of the real estate but even that is questioned at times. I get the feeling they are milking Sears for all it has and when their done, nothing will be left.
So what am I missing here in terms of "milking Sears for all it has"? By the looks of it Fairholme lost money on every single trade. I should have gone to investing school.
As a Fairholme shareholder, I don't care how this investment makes money, so long as it does, eventually.
As an American, I am disturbed at the collapse of a once-great retail chain that still gives jobs to many.
Like the saying, all things based on falsehood will eventually be proven wrong.
I believe that.
I guess if you are fund manager, "eventually" is defined by the timeline of your investors, their patience, their awareness or lack there of.
Which is different from say Buffett, who often says (but does not always do) that he holds stocks forever.
"So what am I missing here in terms of "milking Sears for all it has"? "
I was not speaking of their method but rather the end game, whenever it happens. I don't believe their will be anything left of Sears.
Regards,
Ted
And John, I knew that. Just the whole situation boggles my mind. Maybe like Sandborn at Oakmark, Berkowitz will eventually be proven right but he sure knows how to test his shareholders. Maybe he will announce a hard closing of his fund(s).
Bruce Berkowitz: "We’ve stayed the course under pressure. However, sadly, not all shareholders have had the courage required at bottoms. We hope our current shareholders share the same long-term focus we do. "
There is indeed a time limit on success as far as the shareholder goes. How long do you hold a losing fund before you pull the plug? Bruce is hoping the new shareholders share his vision, or stay the course long enough that his bet on Sears turns the corner. Problem with that IMO is that each cycle of shareholders becomes less and less patient.
Full transcript here.
http://www.valuewalk.com/2015/02/bruce-berkowitz-fairholme-capital-conference-call-transcript/