Sears Holdings stock price has been declining rapidly. The challenge for long-term investors is to look past its current decline and look at its valuation.
Analyzing Sears Holdings as a single company and not in relation with its parent company ESL Investments, will lead to the conclusion that it is a “failed” or “dying” retailer which has entered its 26th month of bankruptcy and still has huge debts.
ESL has said that if Sears Holdings debt and warrants were converted to equity, the company would be the owner of 73.6% of Sears Holdings. This converts to approximately 156,724,205 shares of common stock. So, approximately 206,000,000 will exist.
Eddie Lampert has already given $1.2 billion as cash to Sears Holdings as new equity. The unsecured creditors committee has been given $35 million. Mainstream financial press seem to have missed these contributions and have labeled the company as a “dying retailer” rather than a diverse group of individual companies with assets and profitable owned and leased real estate. One of these assets was recently sold for a billion dollars.
Part of Sears turnaround is its online retail site Sears.com. It has become substantially price competitive up against it peers such as Walmart and Amazon. Not only is the site well designed to find great values on top brands, there are online shopping deals with major discounts. Sears.com also offers cash back perks and a “Shop Your Way” program that is free to sign up for. In return you get- 1% CASHBACK in points for every dollar you spend, FREECASH in points (just because we like you), bonus points, exclusive coupons & more.
Sears Holdings and the UCC have over $1.3 Billion in cash from the sale of Innovel Solutions in the unencumbered assets account and 300M in new money.
According to tax expert Robert Willens, the net value of net operating losses and tax credits is worth at least $2.2 billion.
Sears Holdings’ common stock is currently worth at least $17 a share in cash, net operating losses, and unencumbered asset proceeds.
Sears shareholders and bondholders should view ESL as its parent company and guarantor of the unsecured debt.
When you research 368(a) Tax Reorganizations and you will see that Eddie Lampert is a Genius and the non-retail assets are with many Billions of dollars, SHLDQ creditors and shareholders have a significant interest in the assets of Transform Holdco, and we will be paid out in cash and stock of the new entity.
If you stay patient, there is a possibility of high returns. However, all investments have risk factors and these have to be considered by the investor. Invest at your own risk.
CWEB Analyst’s have initiated a Buy Rating for Sears (SHLD) and potential upside of $15 – $25 by 2021. Compare to Etsy (ETSY) which is reaching close to $200 Sears has a lot bigger upside and more real estate on hand. Few years back Etsy saw its stock go from low $4 to $100 within a year time.
