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Sears Holdings jumped as much as four percent on Monday, bringing its year-to-date gain to 60 percent, following a report that Goldman Sachs and some of its clients need the stock to continue climbing to keep their investment in the hedge fund of Eddie Lampert , the retailer’s chairman, in the black.
Goldman and some clients invested more than $3.5 billion in ESL Investments four years ago and were taking a bath on that investment last year after a nearly 60 percent drop in Sears, one of the fund's largest holdings.
The rebound in Sears this year has put that investment in the fund up almost 1 percent, the Wall Street Journal said, citing people familiar with the terms of the deal.
The company secured some inventory financing from CIT group this year, but most traders cite a powerful combination of a short squeeze and speculation the stock may be sold or taken private by Lampert himself.
About 14 percent of Sears shares available for trading are sold short , or being used to bet against the company.
“You gotta get out of the way of this thing now,” said Michael Murphy, a hedge fund manager with Rosecliff Capital. With this Goldman backing, “he’ll do anything to keep the run going, even sell the company.”
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