Our last posting on January 28, 2018 closed with the following remark:
“So what do we expect from SHLD management in the short-term? We believe that the stock will experience another short squeeze with news that is supposed to reflect that the company has ‘turned the corner.’ The temporary boost will rout the short-sellers and buy some time for management. However, as we said in our February 10, 2017 posting, ‘…anyone who continues to hold their position in Sears will not be rewarded for the value that has been lost since Lampert came on board.’”
The goal of our posting in January was to continue to caution readers before they consider putting money into SHLD stock. Since January 2018, we’ve seen the following “short squeeze” action in SHLD.
After not having posting anything on his blog since October 2017, on February 11, 2018, Lampert responds to critics questioning his involvement in the Sears Canada bankruptcy. Lampert, in spite of having a combined 53% stake in Sears Canada said, “…I don’t have firsthand knowledge of their internal deliberations and the alternatives considered.” Apparently, this was good enough to see reversal of the long-established declining trend in SHLD stock price.
On March 14, 2018, SHLD was reported to have sales profit from the holiday quarter. However, much of the profit was due to the $470 million dollar gain from U.S. tax legislation. Without the tax gain, SHLD would have a reported loss for the same quarter.
In spite of losing $10.8 billion since 2010, on March 29, 2018, it is reported that Lampert gets a pay increase of +24%. However, it is pointed out that Lampert continues to do a bulk of his charity work for Sears at a meager annual salary of $1.
On May 9, 2018, it was reported that at the annual shareholder meeting, Eddie Lampert said to the amassed crowd, “…we are still ‘fighting like hell…’”
All of these talking points have managed to increase the price of SHLD from a low of $2.15 on February 9, 2018 to a high of $3.80 by May 16, 2018, a change of +76% in three months. This had to be a devastating blow to the short sellers that were right about the company prospects but wrong about the timing.
Based on our January 28, 2018 article, Sears has lost –23% in the share price. We aren’t confident about the prospects for SHLD at this time. However, a “short squeeze” is always a tactic for boosting confidence that won’t draw the same kind of criticism from regulators that a short selling campaign would.