Sears stock rises on speculation it may go private
Shares of Sears Holdings Corp. soared amid speculation that the company controlled by hedge fund billionaire Edward Lampert could go private.
The shares closed up 9.5% at $36.75 on Tuesday after rising as much as 16%. The Hoffman Estates, Ill., company’s stock dropped 56% in 2011.
Sears’ stock dropped last week after CIT Group Inc., a key lender in the retail industry, revealed it would no longer provide loans to suppliers shipping goods to Sears and Kmart, news that sparked questions about Sears’ future. Although CIT has little direct business with Sears, its opinion could sway other lenders to follow suit.
Sears declined to comment on the prospect of going private. “We don’t comment on rumors and speculation,” said Chris Brathwaite, spokesman for the operator of Sears and Kmart stores.
Sears has been hit by a disappointing holiday sales drop, a string of quarterly losses, rising debt, dwindling cash, store closings and downgrades from the major credit agencies deeper into junk territory.
Sears stock had been as high as $80 in October at the start of the crucial holiday shopping season, when the company traditionally generates 30% of its annual revenue.
Lampert, who is also Sears’ chairman, owns 62% of Sears, and with the stock price falling it gets cheaper to buy the 38% he doesn’t have, analysts said.
The market buzz followed some unusual buying in Sears call options in the first 25 minutes of trading, said Jon Najarian, a co-founder of online stock, options and futures brokerage TradeMonster.com in Chicago. Buying of Sears stock and options moved up as the rumor of a leveraged buyout spread, Najarian told Reuters.
Sears is expected to report its fourth-quarter financial results Feb. 23.
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