Talk

The intertwined world of business

KMart is contemplating declaring bankruptcy (Chapter 11) which would allow it to restructure its operations. (As an aside, KMart is sitting on a decent amount of cash which might prevent it from getting approval for declaring bankruptcy). If KMart were to go bankrupt what other businesses might be affected? Well, KMart requires retail space. Kimco Realty's portfolio has KMart as a major tenant (~13%). So Kimco was dowgraded by Salomon Smith Barney. If KMart were not around some other brands would suffer. For example Martha Stewart has primarily worked with KMart to peddle her wares. So you'd anticipate a drop in her market value as well.

Lets snapshot this time

Date: Jan 15th, 2002

Stock	price	marketcap
KM	2.54	1.85b
MSO	15.03	732.5m
KIM	30.05	2.89b

We'll revisit this in a few weeks.
Update Jan 22nd Just heard that Kmart filed for bankruptcy (chapter 11).

Stock	price	marketcap
KM	0.72	363.8m
MSO	17.51	853.4m
KIM	30.87	2.975b

The rational I can offer is that MSO's shareholders now realize that Martha Stewart can move to another retailer (breaking a contract that was otherwise set to expire in 2008). KIM's stock price probably already incorporated the dismal outlook of an economy that did not require more retail rental space. KIM's P/E stands at 15. With a book value of $18 (per share) I'd say it's looking attractive. But then again I've never been a fan of REIT's or any other business requiring land as capital.

Factoid: When New York was still New Amsterdam, the Dutch govt appointee built a wall in New York to defend against the British attacking from Canada (Unfortunately for him, the British attacked by sea). The street next to the wall was called Wall St. The original traders used to trade with coins which were in 1/8ths? hence when the stock market was estabilished prices were quoted in 1/8th untill the decimalization in 2002.(the last fact needs some research)

Posted at January 15, 2002 10:55 AM