Sears stock sinks as key investor Berkowitz plans to leave board

Bruce Berkowitz, the largest outside shareholder at Sears Holdings Corp., is leaving the retailer's board, a move that sent the stock tumbling on Monday.

Berkowitz, the chief investment officer and founder of Fairholme Capital Management, will step down Oct. 31, about 20 months after he joined the board. Concern that one of Sears's biggest backers is reducing his involvement sent the shares on their worst intraday slide since March.

Berkowitz first reported a stake in Sears in 2005 and held more than 27 million shares, or about a quarter of the total, as of Oct. 12, according to data compiled by Bloomberg. Long a passive investor, Berkowitz signaled he'd get more involved in a December 2015 regulatory filing.

Sears has been kept afloat in recent years by Chief Executive Officer Edward Lampert, who has used his own money to prop up the company.

Berkowitz's departure signals that "these guys could be on different sides of the fence," said Bloomberg Intelligence analyst Noel Hebert. The precipitous decline in retail real estate values may also have given Berkowitz pause, Hebert said.

Shares of Sears, based in Hoffman Estates, plunged as much as 15 percent to $5.75 on Monday. The shares had dropped 27 percent this year through Friday's close.

Berkowitz's decision to leave the board wasn't the result of any disagreement over the company's operations, policies or practices, Sears said in an emailed statement.

"Mr. Lampert and Mr. Berkowitz have a long-standing partnership and continue to have great respect for each other," the company said.

Sears has lost almost $11 billion in the past six years, prompting the company to sell or spin off assets such as its Lands' End clothing business. The retailer's continued cash burn "does not build confidence or trust," Berkowitz said on a February 2016 investor call, noting nonetheless that Sears investors "own valuable assets at historic discounts."

He said earlier this year that there is still value in the traditional retail industry. Commenting on Bloomberg Television after Amazon.com Inc. announced it would buy Whole Foods Market, Berkowitz said that deal "says to me there is a need for physical space in retailing." Additional mergers make sense because department stores, supermarkets and malls occupy prime real estate with infrastructure already in place, he said.

Asked if he thought Amazon should buy Sears, he said: "That would be an intelligent move," though he said he had no reason to believe that would happen.