As of May 23, 2008, Sears Holdings has 132,013,524 outstanding common shares. ESL Investments currently owns 65,639,184 shares giving the fund a 49.7215% ownership stake in SHLD. Notice how SHLD buybacks have significantly slowed as ESL closed in on the 50% ownership stake. Is Lampert timing the buybacks to coincide with a larger event?
Directors & Executive Officers as a group (19 persons) own 55.3% of Sears Holdings. The Tisch family alone owns 4,219,101 shares.
Eddie Lampert’s stake in Auto Nation is 40%. His fund has been aggressively buying shares in 2008. Will Lampert declare a 50% ownership stake in SHLD and AN at the same time?
From Acxiom’s 2007 10-K:
“Our client base consists primarily of Fortune 1000 companies in the financial services, insurance, information services, direct marketing, publishing, retail and telecommunications industries. Some of our major clients include American Express, Bank of America, Baxter International, Capital One, CitiGroup, City of Chicago, DeLuxe, Discover Card, eFunds, Federated Department Stores, GE, General Motors, Guideposts, HSBC Bank USA, HSBC Technology & Services (USA), IBM, Information Resources, Inc., JP Morgan Chase, Philip Morris, Primedia, R.L. Polk, RR Donnelley, Sears, Sprint, TransUnion and Washington Mutual.”
RBS Partner’s recently took up a 4.2% stake in the company. Everyone knows Lampert is a data mining geek constantly scrutinizing sales data. Acxiom’s value proposition is the enormous amount of data it owns on consumers and their buying habits. How do you value all the large longitudinal data sets currently provided by Acxiom? If large diversified retailer purchased Acxiom, would it provide a competitive advantage?
Deep value investors (Fairholme, Pershing Square, Force Capital, Perry, RBS, Legg Mason) and insiders own over 80% of the shares. They are not selling; in fact, Fairholme practically doubled its shares since their last filing. Would Fairholme make an $800M bet on SHLD on the allure of Lampert alone? Would Ackman buy $600M in SHLD if he did not see something? The same guy that reportedly read over 100,000 pages during his analysis of short sale of MBIA and Ambac.
From the last SHLD 10-K:
The share repurchase program, authorized by our Board of Directors, has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.
Subsequent Event
On May 28, 2008 our Board of Directors approved the repurchase of up to an additional $500 million of the Company’s common shares. This authorization, when added to the $143 million remaining as of May 3, 2008 under previous authorizations, provides us with a current aggregate authorization of $643 million.
How could the Board of Directors have authorized a $643 million during a quarterly loss if they believed it was a poor business decision? At today’s prices, $643 million would buy 7.6M shares. With less than 26 million shares actively traded in the market and a short interest on 24,878,638 (as of 5-15-08) , it will definitely make things interesting.
I agree with your reasoning. Great post on the insider situation at Sears. I’d be hard pressed to be convinced that Lampert, Ackman, Berkowitz, Legg Mason, and Pabrai are going to be wrong here.
I posted some comments yesterday on the Sears situation on my blog as well, take a look if you’re interested.
http://circleofcompetence.blogspot.com/2008/05/simply-summing-up-sears-lesson-in.html
-Jeff
Good post with a lot of good information. I have a couple of questions:
1. Could SHLD be purchasing more of its stock to prop up the price and avoid other triggering events?
2. What is SHLD worth if they buy AN?
Thanks.
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