moneyball, what do you think of aviclara's comments on the original VIC writeup? He/she is pretty good about looking at the short end of things so I'm curious to your thoughts. I'm not that worried about fraudulent conveyance risk but that risk may pop up in the future if SRG purchases new assets from SHLD.
I sort of look at SRG like a low cost funding vehicle for SHLD, except SRG has a lot of low hanging fruit to capture over the next few years. I don't think Lampert cares as much about the value of SHLD these days except from the standpoint of keeping them out of bankruptcy. He's going to have an easier time creating new value for himself in SRG and having SHLD as a cheap call option on the retail business that he seems so fond of being overly involved with. I haven't looked at the numbers lately but I believe he has more net worth tied up in SRG if you exclude SHLD debt.
You almost have to marvel at the financial engineering here and say it might be worth taking another close look at SHLD. I mean SHLD owners didn't have to put up a lot of capital to buy the assets at $29 (given the difference was made up in debt) and it's already being valued at $49 with Buffett buying stock for his personal account. I don't think it's a stretch to say SRG could be worth $75 or more in a few years.
If you exclude the way out of the money warrants, SHLD only has a $1.6 billion market cap and can pull this maneuver again if they can keep themselves out of bankruptcy. I don't know if Lampert has the capital to do it, but another rights offering for more real estate sales could send SHLD back up to $30 within a week of the announcement. When you look at the current liquidity picture for SHLD it's almost given that they'll need to do that. What else can they sell at this point now that store closures aren't turning the business cash flow positive?
But the bearish side of me knows that Lampert is sitting majority position fulcrum in the 2019 bonds so maybe he just wants to get outside the fraudulent conveyance window given how little capital he has left after the last several rights offerings. I don't get that vibe off his actions but it's a possibility.
