Morning Brief: Sears Plunges on Berkowitz Departure From Board

Bruce Berkowitz of Fairholme Capital Management is leaving the retailer’s board of directors at the end of the month.

Shares of Sears Holdings Corp. plunged 11.5 percent Monday to $5.99 after the company announced that long-time investor Bruce Berkowitz of Fairholme Capital Management is leaving the retailer’s board of directors at the end of the month. Berkowitz, who is chief investment officer of Fairholme, joined the board in February 2016. “On behalf of the board of directors and management, I want to thank Bruce for his long-term commitment and investment in Sears Holdings,” Edward Lampert, chairman and chief executive officer of Sears Holdings, said in the announcement Monday. “His leadership, guidance and counsel as a board member have been invaluable to our company.” Bloomberg reported October 16 that Berkowitz is shutting his Fairholme Partnership hedge fund and would distribute its holdings, including a stake in Sears, to investors. Shares of Sears are now down 57 percent from this year’s peak in April. The retailer had reached an all-time high of nearly $192 about 10 and a half years ago.


JANA Partners has filed a proxy statement urging shareholders of EQT Corp. to reject the energy company’s plan to acquire Rice Energy. Reiterating previous public statements, JANA founder Barry Rosenstein disputes EQT’s claims the merger will create billions of dollars in drilling and other synergies. “Our analysis shows that these claims are likely vastly overstated and would likely amount to only approximately $600 million to EQT shareholders,” Rosenstein said in the proxy statement. “Yet EQT stockholders would be paying an acquisition premium of $1.8 billion, approximately three times the amount of actual synergies that we believe would be created by the Rice acquisition.” He also once again said that any discussed potential synergies could be pursued separately by both companies “without EQT stockholders paying a massive premium to Rice stockholders.” Shares of EQT are down nearly 7 percent since their late July high when JANA started to openly oppose the acquisition.


Boaz Weinstein’s Saba Capital Management has taken an activist position in another closed-end fund. In a regulatory filing the credit-oriented hedge fund disclosed it owned 7.96 percent of Alpine Total Dynamic Dividend Fund, saying the shares are “undervalued and represent an attractive investment opportunity.” The firm also warned it may take some sort of activist action in the future. Alpine Total Dynamic Dividend Fund’s stock is trading at an 8.52 percent discount to net asset value, or NAV. However, this is narrower than its six-month average discount and its three-year average discount to NAV, according to Morningstar.


Separately, Saba said it owned 5.19 percent of the Templeton Emerging Markets Income Fund. However, this filing was made using a 13G document, suggesting it is a passive investment.


The Preqin All-Strategies Hedge Fund benchmark rose 1.43 percent in September, its best monthly gain since January, according to the London alternatives scorekeeper. The benchmark is now up 8.28 percent for the year. Preqin says this is the highest nine-month return since 2013.