Sears' stock price keeps climbing

With no real news to justify a rally, you have to wonder if we're seeing 'the mother of all short squeezes.'

By Kim Peterson Jan 23, 2012 4:34PM
Updated 4:50 p.m. ET

Image: Arrow Up (© Photodisc/SuperStock)Sears Holdings
(SHLD) has been an oddball stock for a long time, but this January it's just gone bonkers.

Look at what's happened in the last trading day. Shares shot up more than 10% Monday in morning trading, and finally fell back to a 3.3% loss to close at $47.39. Why? No one knows. But this action is just a normal trading day with Sears. Shares are up more than 50% so far this year.

The thing is, there's nothing going on with the company itself to justify such a rally. Sears is in the middle of closing down more than 100 stores, and the company's own financials show little investment in its future. Some suppliers aren't getting paid. The credit rating has been downgraded. Cash is dwindling.

So you get the real sense that there are other plays at work here. Manipulation. Investors trading on fear and opportunity. Short covering.

One analyst explains why she sees a short squeeze in the stock in the following video.

Post continues below.
It all revolves around Chairman Eddie Lampert, who already owns about 60% of the company. He's been on a massive shopping binge for Sears shares, personally buying $159 million in stock this month from his own hedge firm. Sears has been buying back huge amounts of its own shares for years, reducing the float for everyone else.

Lampert's actions helped ignite a rumor that the company might get taken private.

Finally, you have to consider that Sears might be in what The Wall Street Journal suggests is "the mother of all short squeezes." There are very few shares to short, and Sears shares are among the most expensive to borrow, the Journal reported. Short sellers borrow shares and sell them, hoping that the stock price drops enough that they can buy back the shares at a lower price and return them.

If the stock price doesn't drop -- as we're seeing with Sears this month -- some short sellers just buy back the shares and get out. And then the stock price climbs a little more.

"You gotta get out of the way of this thing now," a hedge fund manager with Rosecliff Capital told CNBC. Lampert will "do anything to keep the run going, even sell the company."

Goldman Sachs (GS) really wants this run to continue. The Journal reported that Goldman's clients invested $3.5 billion in Lampert's hedge fund about four years ago. But after Sears shares fell 57% last year, the fund -- and the Goldman investment -- has taken a huge hit.

But Goldman's clients can't withdraw their money until the end of this year, the Journal reports, so the firm is extremely interested in keeping the stock price high. Just a little added pressure on Lampert there.

Related reading:

Tags: GSSHLD
19Comments
Jan 23, 2012 6:09PM
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Here is another reason how Wall street destroys jobs and Corporations...Can you say Greed and Destruction at it's best....!
Jan 23, 2012 5:29PM
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If Eddie and his friends would stop purchasing their own company stock then we would see it's really worth nothing.  Sears is going down, taking it private will not help.
Jan 23, 2012 9:54PM
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Price manipulation on Wall Street ? Hard to believe such things could happen there. After all, the SEC tightly regulates such chickanery and therefore it could not possibly happen.............

Jan 23, 2012 7:08PM
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Probable short squeeze.....just like B of A.  It defies logic that this company can survive in its current form.  The longs will take it in the shorts. But if Goldman is involved, you can be guaranteed that something amiss is going on, like cooked books, or some other scam.
Jan 23, 2012 8:02PM
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lampert and his crook buddie cramer should go to jail like madoff and martha stewart

JUST NORMAL CAPITALISTS MAKING THEIR FORTUNES AT THE EXPENSE OF OTHERS

..............NOTHIG MORE

Jan 23, 2012 8:13PM
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The Sears in my hometown is pretty sad---depressing and the clerks are not very knowledgeable.  When I was a GI in W. Germany in the early 60s I sometimes ordered clothes from a catalog  that I couldn't find in the post PX.  American made items and all kinds of tools.
Jan 23, 2012 7:16PM
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Eddie is doing "anything" except turning a profit. Sears has lost money every quarter for like 4 years. The trend is still down. Bigtime in a short period. Time is running out.
Jan 23, 2012 5:05PM
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If it's rated low, go for it. If it's rated a ten, avoid it. The stupid ratings end up being just the opposite of how the stock performs. With all of the fraud and inside information, the ratings are just one more deceptive practice that entices the small investors to buy into a loss.

It's strange that his post was denied because it said it had a hyperlink or was spam.  I re-posted it using Google Chrome instead of IE and it was accepted.  MSN is such a bogus organization.
Jan 23, 2012 9:30PM
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Close Wal-Mart and all will be better for Sears. Just wish we could have the Sears of pre-Reagan days and good ol' Woolworth's back. I have little use for Target, either...
Jan 24, 2012 12:18AM
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It's valued at $6.00 and it's trading for $48.00? And she says the $6.00 was being generous!!

 

Somebody is seriously wrong here! It can't be the market....can it? After all....the market is always the truth....right? .....not some financial analyst...right? We all know that just because 77% of the stock is held by insiders, there shouldn't  be any reason to suspect that any funny business is going on....right? Because we all know that the White Knights in the business suits always do everything in an honest and honorable fashion.....right?  They would never stoop to anything as low as trying to sell off an almost worthless company for 8 times its 'generous' appraisal by manipulation....right?

 

I've got to say this.....there is going to be some serious hell to pay when this boils over.....and I'm not talking about Sears!

Jan 23, 2012 6:20PM
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Another "heritage" company bites the dust???
Jan 23, 2012 7:21PM
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Sears has become a tired old business with no lustre what-so-ever!  I stopped doing business with sears years ago.  I found employee attitude pathetic, merchandise and service quality even lower than mcdonalds, , , and that is saying something!   Sears and the postal service are waaayyyyy  overdue to go the way of montgomery-ward and the Great Lizards. The sooner, , the better!

Jan 24, 2012 6:33AM
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Short selling is all it is.......Brokers have been doing it for years.....and it's perfectly legal.
The Stock Market is all over the charts because of this type of gambling. You can't make an informed intelligent  investment anymore because of it........... it needs to stop.

PS.  Cramer's a big loser.  Check his record.  Just another BS'r who's makes money buying stock a few days before he brags about it on his show.

Jan 24, 2012 12:10AM
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Sounds like price manipulation to me.  Sucking money out of the low income population that struggle to make a buck.  Who authorized them to use other owners stock for a short sale. 

Can I use my credit card as security on a mortgage  - NO Way. 

Why should they get to use something that isn't even theirs to make money.

Jan 24, 2012 7:21AM
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it is big money at it again.  if you could see who is buying this stock  buy  low  sell high  as soon as things settle  down  it will drop  its  big money  making you think it is a good investment  small investors  see this and  bam big  money sells  out and the little  guy is  left  holding the  bag
Jan 24, 2012 1:17PM
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Lampert's making himself one hell of a golden Parachute...Take Sear's private and sell sell sell it all off back to even more suckers later! Effectively Junking Sear's was a planned move after having 3.5 billion of investor money dumped into the stock and now all the shorts are getting clabbered out as well and forcing them to sell at huge losses......Another brilliant executed Wall Street Con move...Watch and learn from the best.....GET OUT OF THE MARKETS.....THIS IS WHAT YOU HAVE TO LOOK FORWARD TOO....MORE OF THE SAME .......DO NOT BE CONED ANY MORE...TAKE AWAY THEIR POWER.......NOTHING IS SAFE AROUND THESE GUYS...NOT YOUR 401K, NOT YOUR IRA AND NOT EVEN YOUR GOLD.....THEY USE YOUR MONEY TO GET RICH AND YOU GET THE SCRAPS OR THE SHAFT..! GET OUT OF STOCKS AND METALS NOW BEFORE YOU LOSE IT ALL.....!
Jan 25, 2012 3:36AM
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@ time2share

 

is it still possible that de stock price will rebound and go to approx 50 dollars this week or do you see it's getting sold and the stock price will fall under the 40 dollars?

Jan 24, 2012 6:56AM
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so with yesterday in my mind, can the stock rebound? Don't know what's going on but i'm hoping to see a rebound... to approx 51 i'm happy...
Jan 23, 2012 7:33PM
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