The value of Sears may lie in KCD, a unit where Chairman and controlling shareholder Eddie Lampert has put the company's crown jewels including Kenmore, Craftsman, and DieHard brands. Lampert has also taken care to separate Sears into "guarantor" and "non-guarantor" subsidiaries and importantly KCD and a unit housing 125 properties leased to Sears aren't guarantors.
Hedge fund analyst Cliff Orr notes that loan documents indicate that KCD and other non-guarantor subs generate more than $600 million in free cash flow annually.
Orr sees "substantial" unappreciated value in Sears' real estate. Many buildings are decades old and carry antiquated valuations on the books. Also, the company's mall stores have long-term leases at prices well below market rates. Landlords could be tempted to buy them out and repurpose the space.
With the risk-reward compelling, Orr sees shares of Sears worth at least $100 per share.
Major short squezze, 47% held in short positions on a very small float, spells major danger for shorts