Eddie Lampert is losing more than Sears and Kmart shoppers this year.
The secretive and successful Wall Street tycoon is being forced to return billions of dollars to disgruntled clients of his ESL Investments, the shrinking hedge fund through which Lampert has been dismantling Sears Holdings.
The company’s stock traded as high as $169 a share in 2007, but according to an insider close to the situation, many of ESL’s clients have been furious about Sears’ results, which have sparked a continued tailspin in shares.
On Thursday, shares lost 1.9 percent to close at $49.98.
“They believed Eddie knew Sears was overvalued at close to $200 a share and raised $5 billion based on that,” the source told The Post.
Accordingly, the disgusted investors “were going to redeem the moment they could,” the source said.
ESL disclosed this week it was forced to cough up 7.42 million Sears shares worth $471 million this year to meet client redemptions — a stake that has since lost a fifth of its value.
Experts said stock-based “redemptions in kind” are a tactic to avoid raising cash by selling stock, leaving clients stuck with any downside.
“If I did that, there would be people at my door with baseball bats,” said David Tawil, co-founder of New York hedge fund Maglan Capital. “He doesn’t care how much people hate him. He did the right thing for himself and his remaining investors.”
A spokesman for ESL declined to comment.
On Thursday, WSJ.com reported that Goldman Sachs clients who poured $3.5 billion into ESL in 2007 have demanded their cash back following the expiration of a five-year lock-up. Most of the cash has been returned, according to the report.
As reported by The Post, Lampert has been selling off valuable assets of Sears Canada, taking hefty dividends, with plans to liquidate the chain.