What happened

Shares of Sears Holdings (NASDAQ:SHLDQ) were surging this afternoon in a last-ditch effort by Chairman Eddie Lampert to make a bid for the bankrupt company before it goes into liquidation. After negotiations between the company and Lampert this morning, the two parties staved off Sears' liquidation process at least for another day as the company is set to go to auction on Jan. 14, provided Lampert makes a $121 million deposit tomorrow. 

As a result, Sears stock was up 33.1% at 2:52 p.m. EST on Tuesday. 

The exterior of a Sears department store.

Image source: Sears.

So what 

Investors hope that Lampert will be able to go through with his $4.4 billion buyout plan, which appears to include having $1.3 billion in loans from his hedge fund, ESL Investments, be forgiven. Lampert's plan is to keep 425 stores open, a core group that he says are profitable.

Sears' independent board of directors had earlier rejected Lampert's bid, but the company's assets are now set to go to auction next Monday, Jan. 14. However, like most bankruptcies, the matter is contentious as unsecured creditors like landlords have said they'd rather Sears liquidate, as they think that gives them a better chance of being made whole. Shareholders would almost certainly get nothing in the event of liquidations, so they would prefer Lampert's bid to go through.

Now what  

Sears stock is likely to remain volatile in the days leading up to next week's auction as the company's fate remains up in the air. Keep an eye out tomorrow for news on whether Lampert makes the expected $121 million deposit, as that is likely to swing the stock one way or another.

Check out all our earnings call transcripts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.