What happened
Shares of Sears Holding Corp (SHLDQ) were tumbling for the third day in a row today as concerns about the company's plan to stave off bankruptcy continued to mount. The stock also fell below $1, jeopardizing its listing on the Nasdaq. Though there was no specific news out on Sears today, investors sent the stock lower once again. Shares closed down 16.4%, marking the seventh straight day it has traded lower, following a 10% drop on Thursday and a 4% sell-off last Friday.
Image source: Sears.
So what
Last Monday, Sears shares started falling when the company said that CEO Eddie Lampert's hedge fund, ESL Investments, had made a number of proposals for the company, including restructuring $1.1 billion and selling $1.5 billion in real estate holdings and $1.75 billion in other assets, including Sears Home Services and the Kenmore appliance brand.
Since then, Sears stock has fallen by more than a third as it's become clear that the company is fast approaching. Now that the share price is under $1, investors are also concerned that the stock could be delisted from the Nasdaq. According to Nasdaq rules, if Sears trades 30 consecutive days under $1, then it has 180 days to get back in compliance with exchange rules. If not, it will be delisted.
Now what
Sears' comparable sales improved in its most recent earnings report, falling 4%, better than a double-digit drop that had become the norm, but the company's massive losses continued. Even after closing hundreds of unprofitable stores, the company's chances at a legitimate turnaround appear to be almost zero. At this point, Sears' best move is probably taking up Lampert on his offer, selling off those assets, and restructuring its debt. With a $134 million debt payment coming Oct. 15, the retailer will have to move quickly. It had $193 million in cash as of August 4, but the third quarter is generally a heavy spending period in retail as businesses stock up for the holidays.
