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updated: 12/4/2013 1:26 PM

Sears shares fall after Lampert's firm cuts stake

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Associated Press

Sears Holding Corp. shares fell Wednesday after CEO Eddie Lampert's hedge fund disclosed that it distributed the retailers' stock as payment to investors who wanted out of the fund this year. The move, in turn, reduced Lampert's stake in the department store chain.

ESL Partners said that it distributed 7.4 million shares to investors to meet end-of-year redemption requests. Using stock to meet these redemptions can cause investors to rush to unload the shares, which could send the stock price down.

ESL Investments and its affiliates, including Lampert, currently own 48.4 percent of the outstanding shares of Sears. The Hoffman Estates, Ill., company said that Lampert, who is both CEO of ESL Investments and Sears, did not sell or otherwise dispose of any of his personal holdings.

The move, however, did indirectly shrink his stake in Sears from his prior stake of 55.4 percent.

Lampert still remains the largest shareholder in the department store chain by far -- the second-largest holder is Fairholme Capital Management, which owns about 20 percent, according to FactSet.

"We will continue to focus on the transformation of Sears Holdings into a membership focused company and on creating long-term value for its shareholders," Lampert said in a statement. "My significant personal ownership in the company is a sign of my confidence and alignment with all shareholders."

Lampert has been trying to turn around the struggling company, which owns Kmart and Sears stores.

Last year, Sears announced plans to cut costs, reduce inventory, sell off some assets and spin off others to help lower debt and generate cash. Sears recently said that it is considering separating its Lands' End catalog and Sears Auto Center business from the rest of the company. It's also continues to close some unprofitable stores and is selling some store leases in Canada.

Shares of Sears fell $4.87, nearly 9 percent, to $50.73 by early afternoon. The company's shares are up 34 percent for 2013 as of Tuesday's close.

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