Sears stock rallies after shareholder lambasts short sellers, but S3 says don't blame the shorts
Shares of Sears Holdings Corp. (SHLD) rallied 6.8% in active trade Thursday, after a shareholder urged the department store chain's board to take action "alarming" and "excessive" short-selling activity, and to consider a going-private deal. Memento, the investment manager of the Elarof Trust, which owns nearly 2 million Sears shares, said it was concerned about "several occasions" over the past two years that it found evidence of more shorted shares than shares outstanding. That implies "naked shorting"--selling a stock short without first borrowing the shares (http://www.marketwatch.com/story/short-sellers-are-not-evil-but-they-are-misunderstood-2017-11-08)--which would violate SEC rules (Reg SHO). But Ihor Dusaniwsky, head of predictive analytics at financial analytics firm S3 Partners, said investors shouldn't blame short sellers for the stock's fall. He said short interest can technically be larger than shares outstanding, as shares borrowed for one short sale can end up in an hedge fund's long account, then be lent to settle another short trade. He said using margined shares to settle deliveries is "a daily normal occurrence for every broker dealer." Sears' stock has tumbled 52% year to date, while the S&P 500 has gained 18%. Sears has reported net quarterly losses for 18 of the past 20 quarters, according to FactSet.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
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12-07-17 1648ETCopyright (c) 2017 Dow Jones & Company, Inc.