An investor in embattled retailer Sears (NASDAQ:SHLD) is optimistic about the company’s future but wants to kick short-sellers to the curb, even if it requires taking the company private.
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Memento S.A., the family office of the Elarof Trust, an investor in Sears to the tune of 2 million shares, delivered a letter to Sears' board of directors on Thursday expressing concern over the alarming amount of short-selling activity.
“We are a long-term oriented value investor seeking to identify deeply undervalued opportunities in which boards of directors can take immediate and decisive action to significantly increase shareholder value,” noted the letter, adding that they have seen “several occasions” over the past two years when there were more short positions in Sears than there were company shares available to borrow.
“We believe that this shortage of available shares in the marketplace heightens volatility and places downward pressure on the share price. We believe the board must promptly investigate and address this activity to prevent further decline in shareholder value.”
To curb the amount of short selling, Memento has a few suggestions including the board evaluating strategic alternatives such as going private. They also mentioned that the board could seek an SEC investigation into potential violations of regulations and a temporary suspension of short-selling, and/or form an independent board committee to look after the equity ownership interests of all shareholders.
The letter noted that the Elarof Trust has invested in Sears because of their belief in the long-term value, but that they have “deep concerns” surrounding the integrity of the company's securities.
Sears shares were up over 10% at 10:42 a.m. ET Thursday. Year-to-date, they are down 51%.
Sears had 107.61 million shares outstanding, according to their most recently filed quarterly report.