A recent report on Sears Holdings(SHLD) by Morningstar analyst Paul Swinand lowers their fair value estimate for Sears by $10 per share due to the Orchard Supply(OSH) spinoff. Given the distribution ratio of 1 share of Orchard Supply for
approximately every 22 of Sears, and Sears’ 80% ownership in Orchard Supply, this would seem to imply a per share value for Orchard Supply of $176-$220. This seems wildly off. Are we missing something in Mr. Swinand’s analysis? Is our math somehow flawed? Let us know in the comments.