Sears Holdings Corporation (SHLD) Stock Flies 20%, Clobbers the Shorts

Sears Holdings Corp (NASDAQ:SHLD) gained another 20% on Tuesday to extend an improbable run. SHLD stock, which dropped 12% the day the retailer expressed doubt in its “ability to continue as a going concern,” has since pushed nearly 40% higher.

Sears SHLD

What gives?

Well, despite the likelihood that this story will likely end with Sears bankrupt and Sears stock holders left with nothing, institutional money has poured in, and that has been enough to shake out a considerable short crowd.

Specifically, Fairholme Capital Management’s Bruce Berkowitz purchased 287,000 shares of Sears stock between March 23 and March 27 for anywhere between $8.05 and $8.46 per share, according to a filing out Monday. A second filing showed that Fairholme bought 614,000 shares between March 20 and March 22.

CEO Eddie Lampert also gave his company a vote of wallet confidence with his own 526,000-share purchase between March 22 and March 24, according to a Friday filing.

Those purchases set off a spark on the powder keg of shorts sitting in SHLD stock. Specifically, more than 78% of Sears’ float — which doesn’t include what Lampert and Fairholme own — was held short as of the most recently available data. That’s good for a short ratio of 7.5 — meaning it would take seven-and-a-half days of buying at average daily volume to clear out all the shorts in Sears.

Surely, they’re trying.

The big bets come as Sears’ operational results become more and more comically awful. Revenues have sunk from $36.2 billion to $22.1 billion in just three years, and losses have ballooned from $1.4 billion to $2.2 billion in that time. SHLD sits on just less than $300 million in cash versus $3.6 billion in long-term debt — an increasingly untenable situation that seems destined to end in pain.

Sears’ “going concern” language is essentially a nod to that idea — and that despite its continued promises of a turnaround, SHLD stock is a dead equity walking.

But today, the zombie is feasting.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.

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