For those of you following Sears Holdings, you know they distributed rights to purchase shares in their upcoming spin off - Sears Hometown and Outlet Stores (will be traded under SHOS when listed in October). Specifically, for every regular share of Sears I own (excluding options), I received one SHOS right (traded under SHOSR). Each right entitled me to buy roughly .22 shares of SHOS at $15. Given that I own 400 shares of SHLD, I could've used these rights to pick up 87 shares of SHOS for about $1,305 (note: this excludes any impact of the SHOSR over-subscription privilege).
Now, this has special-situation written all over it, and at $15 a share I think SHOS could be a good value. Nonetheless, I sold SHOSR yesterday at $2.60 per right, for total proceeds of $1,035 (after fees & commissions). Here's why...
Had I exercised my rights, I would've foregone the sale proceeds of $1,035. So, the real economic cost for me to participate in the spin off would've actually been $1,305 + $1,035 (cost of shares plus foregone proceeds), which equates to almost $27 per share for SHOS.
Questions? Comments? Email mevsemt@gmail.com.
