Stock market madness: Macerich soars, sinks, and ends up worse off

“Macerich is the next GameStop.”

That’s what one Reddit user said Wednesday on the platform’s wild Wall Street Bets forum, which has helped individual investors scorch hedge funds this week by buying up shares in ailing companies.

The prediction has not quite panned out: GameStop’s share price soared 68 percent Friday, to close near its Wednesday peak, while Macerich’s lost 18 percent as the firm rejoined the ranks of mortal mall owners.

The Macerich Company, one of the nation’s largest retail property owners and shopping mall operators, has been imperiled by Covid-19 as many people continue to avoid indoor shops.

But in a bizarre week of trading, its share price shot up 72 percent by Wednesday, then gave up all that gain and more to finish Friday at $15.69, or 29 cents shy of where it started.

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Tanger Factory Outlet Centers, another large retail owner with locations throughout the country, experienced a similar week. Its share price rose more than 32 percent before ending the week close to its opening level Monday.

Both companies’ heyday in the markets came in 2016, when their shares traded at many multiples of their current value. Since then, ecommerce has become a dominant force — never more so than during the pandemic — and some investors began betting against them.

Approximately half of all Macerich and Tanger shares were held in January by short sellers, who reap profits when share prices decline. But this week’s spike, driven by quixotic day traders, gave some companies and their backers a financial reprieve.

The largest shareholder in Macerich sold its entire holding Wednesday at an average share price of $20.25 for a total of $500 million, Bloomberg reported. The shares belonged to the Ontario Teachers’ Pension Plan, which owned 16.4 percent of the company.

Massive share-dumping typically drives the price down, and in this case, it also suggests a loss of faith in the company.

“The fact that OTPP decided to hit the eject button on its Macerich investment at seemingly the first feasible opportunity post-Covid could be interpreted as a dire outlook,” said Vince Tibone, a senior retail analyst at GreenStreet.

Macerich has $1.5 billion in outstanding unsecured loans, which will come due on July 6. It also has $800 million in mortgage forbearance against its properties. One reason for its precarious position is its past habit of converting equity in its properties to cash.

“Macerich was active historically about cash-out refinancing — clearly a complication now,” said Alexander Goldfarb, managing director of equity research at Piper Sandler.

Stock-price jumps present an opportunity for companies to raise capital, but for now, Macerich appears to have missed its chance. Goldfarb said it would need $2 billion to cope with its line of credit and mortgage situations.

When OTPP decided to head for the exit, Macerich lost an important ally, said Tibone. The pension fund had sided with Macerich in 1995 when Simon Property tried to acquire the company at $95.50 per share.

“The departure of OTPP appears to make Macerich more susceptible to activism or even an unsolicited takeout offer down the road,” said Tibone.