5% free float. 20% short interest.
$8.6b in real estate value. $1.4b in working capital. $3.5b in net debt.
Est. market capitalization = $6.5n = $61/share
This does not take into account of some of Sears most valuable businesses. For e,g, - Sears home service and protection business, Kenmore, Craftsman & Diehard to name a few.
I believe the value of the above additional value is more than enough to offset Sears pension liabilities and cost of winding down uneconomic stores.
In addition, you get a world class CEO. Eddie Lampert, who is an excellent capital allocator. Excellent is actually an understatement. Since 1988, Eddie Lampert hedge fund returned 29% CAGR. So you can be rest assured that you are in good hands. He WILL monetize Sears.
You can buy Sears today at $36/share, or a 70% upside to a very conservative intrinsic value. What is better is that the current short interest to free float ratio is 4 to 1. And the cost of borrow for Sears is 20%. Eventually, people will recognize the monetization efforts of Eddie Lampert and we will see a massive short squeeze. Similar to the one that occurred to VW in 2008. Probably not as bad, but it is a precedent.
The best part is that you can do this via warrants. Yesterday, Sears distributed its warrants. These are 2019 call warrants with a $28 strike price. You can buy these warrants at $17 per piece today. That translate to a 100% upside assuming no time and volatility premium. As I think that this will happen in short order (if not I will switch to a stock position), I believe that the premium, which is currently at ~$9, will actually expand. Assuming no expansion, these warrants have a 150% upside and optionality from additional value from Sears business, gamma expansion, or a massive short squeeze.
Thank you.
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