The latest Sears (SHLD) spin-off that I warned investors to stay away from, Sears Hometown and Outlet Stores (SHOS) will start trading this Friday October 12, 2012.
“Sears Holdings expects to distribute a total of 23,100,000 shares of Common Stock to the holders of subscription rights who validly exercised their subscription rights and paid the subscription price in full, including pursuant to the exercise of the over-subscription privilege.” Based on the subscription rights price, the shares are expected to trade around $28/share.
Sears will receive almost $450 million in gross proceeds from the spin-off. This is great news for Sears shareholders. Not only does this alleviate liquidity concerns that investors had earlier this year, but it also gets rid of an unwanted business.
I expect the shares to trade higher as investors are lured by the low P/E ratio, but eventually the shares will come down due to deteriorating business fundamentals much like its last spin-off, Orchard Supply Hardware (OSH).
From an amended 13D filing report on September 26, Eddie Lampert is already shedding Sears Hometown. He used to own 62% of Sears Hometown, but now owns less than 60%. I will update investors in November when ESL Investments Quarterly Holding Report (13D) comes out about his stake in Orchard and Sears Hometown. See the 13D filing here.
Read the full press release here.
Disclosure: I do not own shares of Sears (SHLD). I am short Orchard Supply Hardware (OSH).