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Subject:Sears is small potatoes compared to ExxonMobil ... beware a BIG SPLASH
Date:November 3, 2018 at 8:34 PM
To:Brian Hughes (Senate ENR-R) Brian_Hughes@energy.senate.gov, Melissa Enriquez (Senate ENR-R)
Melissa_Enriquez@energy.senate.gov, Suzanne Cunningham (Senate ENR-R) Suzanne_Cunningham@energy.senate.gov,
Mary Louise Wagner (Senate ENR Ctee-D) MaryLouise_Wagner@energy.senate.gov, Scott McKee (Senate ENR-D)
Scott_McKee@energy.senate.gov, Megan Thompson (Sen. Cantwell) Megan_Thompson@Cantwell.senate.gov
Cc: U. S. Senator Bernie Sanders senator@sanders.senate.gov, Katie Thomas (Sen.Sanders) katie_thomas@sanders.senate.gov
Unrelentingly,
Doug Grandt
Putney, VT
New York (CNN Business) Would $6 billion in cash have kept Sears out of bankruptcy?
It sure wouldn't have hurt. Sears' ability to stay in business is in doubt after the company
filed for bankruptcy protection this month.
Yet Sears spent $6 billion buying back its own shares since 2005 in a futile effort to help
support its stock price. The stock plunged more than 99% in value, from a high of $143.91
in 2007 to less than $1 a share a couple of weeks before its bankruptcy filing. In bankruptcy,
the shares are essentially worthless.
"If they had put $6 billion into upgrading stores and website development, they could be in a
"If they had put $6 billion into upgrading stores and website development, they could be in a
very different position right now," said William Lazonick, a retired University of
Massachusetts economics professor and an expert in share repurchases. "They could be in
a much better position to compete in the changing world of retail."
Sears bought back about 21.7 million shares of its stock in 2007, when the company was
still profitable. It paid $2.9 billion for those shares. But its stock started to decline as the
sales and profits fell and the company's problems became more apparent to investors. By
the end of the year, Sears' stock price had fallen more than 40% from its peak.
But Lampert and Sears doubled down on share repurchases, buying an additional 22.9
million shares for $1.5 billion, over the next three years as the company's problems
mounted. It repurchased a final 2.8 million shares for $183 million in 2011, as the company
started losing money. It never returned to profitability, and its stock price never recovered.
Sears was hardly the only company purchasing shares over the past decade. Amazon
(AMZN) bought shares, primarily to keep the number of shares outstanding level as it issued
stock in the company as a form of employee compensation. General Electric (GE), another
iconic company facing problems today, repurchased $24 billion in shares in 2016 and 2017
alone.
Critics say stock buybacks are a way for executives who depend upon stock and options as
a major form of their compensation to boost their pay. But it's rarely a good idea said
Lazonick.
"They're just a waste of money. They're only going to give a temporary price bump," he said.
"For a company as troubled as Sears to be doing repurchases, it's predictable it's in the
state it is now.”
https://www.cnn.com/2018/10/30/business/sears-share-repurchase/index.html
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