ESL Investments CEO Eddie Lampert has emerged victorious in the Sears Holding Corporation bankruptcy auction with a $5.2 billion bid that potentially saves tens of thousands of jobs and keeps 425 Sears stores open across the United States.

Sears Shares Leap after Lampert Wins Bankruptcy Auction

Earlier in January, CCN reported that Lampert was granted more time by a judge to up his rejected $4.4 billion bid to take over the ailing retailer. While the deal comes as a relief to the estimated 45,000 people whose jobs still remain technically at risk, it still needs to be ratified by a judge.

At the time, it was also reported that creditors preferred a liquidation to the prospect of Lampert taking over the iconic retailer, owing to several controversial decision made during Lampert’s tenure as CEO of Sears where he still holds the position of chairman.

Coming after weeks of negotiations and legal tussles, news of the deal sent the 126-year-old retailer’s share price up 68 percent to a 3-month high of $.084.

sears eddie lampert
Sears Holding Corporation Stock Price jumped 68 percent on news of Lampert’s successful bid | Source: TradingView

Bankruptcy Controversy Amid Amazon’s Prolonged Retail Disruption

According to sources quoted by ReutersLampert’s bid went through in the early hours of Wednesday after he put in additional cash and liabilities to improve the previous bid. The successful conclusion of the auction is only the first part of any prospective recovery for Sears, as the deal must be documented and is still subject to regulatory approval by a U.S. bankruptcy judge.

In addition, a group of creditors is still opposed to the deal, claiming that they stand to recover more from a total wind-down and from civil lawsuits against ESL Investments over controversial deals carried out with Sears – which Lampert insists were above board – during his tenure as CEO. His sole challenger during the auction process was Sears itself, whose concern was that Lampert’s previous bids would not cover the bills incurred by the retailer since it went into administration. The new bid is expected to fully cover these liabilities, which is a key requirement for bankruptcy protection.

The retailer’s woes tell a wider story of disruption and falling fortunes in the physical retail sector which has been devastated by the growth of Amazon and other online shopping platforms. Despite merging with Kmart in an $11 billion deal in 2005, Sears eventually succumbed to the same circumstances that have befallen a number of big-box retailers including Toys R Us Inc., J.C. Penney and Bon-Ton Stores Inc., among others.

Credit: CCN

Amazon is now the fourth largest company in the world behind Apple, Microsoft, and Alphabet (Google) after suffering its worst quarter since the 2008 recession.

Merely three months ago, at the start of the fourth quarter of this year, Amazon was valued at $1 trillion. Currently, as of December 28, Amazon is valued at $680 billion, down $320 billion from its quarterly high.

Chart from TradingView.

Losing 32 percent in a three-month span, the fourth quarter of 2018 is officially the company’s worst-performing quarter since the financial crisis a decade ago.

Factors Behind the Amazon Stock’s Struggle

Amazon’s drop in share price is not exclusive to the e-commerce giant. As the main stock indexes of the U.S. market tumbled into a bear market, major companies in the likes of Facebook, Apple, and Microsoft lost over 30 percent on average.

Apple, for instance, which still remains as the second biggest corporation in the U.S. behind Microsoft, lost 35 percent of its valuation since October 3, losing an additional four percent on the day.

But, over the past several weeks, Amazon has struggled to meet the expectations of investors. The growth rate of the firm’s cloud computing unit fell short from the projected rate and the overall revenue of the company, despite high sales during the Christmas season, was not as high as investors anticipated.

In India, a key market for the e-commerce company, Amazon has also encountered a regulatory roadblock that may disallow the firm from selling certain products like mobile phones in the local market.

Having already spent billions of dollars in establishing its presence in India through the acquisition of a supermarket chain, “E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field,” the newly released rule by the Indian government read.

The rule was created to help bolster the local e-commerce sector by eliminating the leverage foreign companies have on the market.

Kunal Bahl, the CEO of Snapdeal, optimistically said that the restrictions will create a more competitive and even playing field for all merchants.

He said:

Marketplaces are meant for genuine, independent sellers. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce.

For Amazon and even for Walmart, which spent $16 billion on the acquisition of Flipkart, an e-commerce rival of Amazon, the newly imposed restrictions by the Indian government led to a steep drop in their share prices.

Key For Amazon’s Recovery
Like every other major technology stock in the U.S. market, Amazon suffered a steep sell-off over the past several months and as investors expect the stock market to continue declining across the first quarter of 2018, Amazon may see extended losses.

The key for Amazon and large corporations in the U.S. market for recovery is to focus on meeting the expectations of its investors through the prioritization of recovering their core revenue sources.

Credit: CCN