Shareholders of Sears Holdings(SHLD) have been once again reminded that entropy is inexorably increasing, at least in their brokerage accounts. Less than a year ago they had only Sears, but since then, they have received in three separate transactions, Orchard Supply Hardware common (OSH) and preferred (OSHSP), warrants to buy Sears Hometown and Outlets (SHOS), and now, Sears Canada (SCC.TO).
Sears had held over 95% of Sears Canada’s shares and tried, just a few years back, to buy the entire company. Yesterday, the company distributed 0.4283 shares of Sears Canada to shareholders for each share of Sears holdings they owned. In total, the company distributed 44.5% of the Sears Canada’s outstanding shares, retaining a 51% controlling interest.
One presumes there is a method to the madness. Eddie Lampert, who controls Sears Holdings, is working feverishly to create liquidity and enhance focus, but there seems to be little rhyme or reason, and no evidence yet of a grand strategy to create value. We sold our shares of Sears Holdings in January, and could not see re-entering without a deeper understanding of what is going on.
Disclosure: Author owns shares in OSH and OSHSP
- Sears Canada halves loss, but CEO says turnaround moving too slow (theglobeandmail.com)
- Eddie Lampert’s RBS Partners Buys Netflix, Dumps Auto Zone Stake (valuewalk.com)
- Sears Canada’s sales drop as Target threat looms (business.financialpost.com)
- Sears Holdings Corporation Board of Directors Provides Final Approval of Partial Spin-Off of Its Interest in Sears Canada Inc. (sacbee.com)
- Attention, Kmart Shoppers: Flat-Line Special (businessweek.com)