dropped J.C. Penney (
) like a new toy that lost its luster last month, other investors
are losing confidence. Investor
of Perry Capital, after adding 7 million shares to his J.C. Penney
stake on Aug. 30, slashed it by 47.37% yesterday, Oct. 1.
Perry's $15 billion hedge fund acquired 12 million shares of J.C.
Penney in the second quarter this year, when the price averaged $17
per share. Yesterday's reduction will leave him with 10 million
shares. J.C. Penney is trading at a 10-year low of $8.81 per share
on Wednesday, giving the investor an approximate 48% loss on the
trade so far.
Perry's JCP investment history:
Though Perry just bought the stake, much has happened between now
and then. Namely, the company's largest shareholder and man behind
a mid-stage overhaul plan, Bill Ackman, dumped his entire holding
of 39 million shares on Aug. 27. His exit came after a kerfuffle
with management in which he pushed to expedite the process of
finding a new CEO. The company also reported its ninth consecutive
quarter of quarterly revenue declines and eighth of net losses,
culminating with its 10-year record loss of $586 million in the
Adversely impacting results were "failed prior merchandising and
promotional strategies, which resulted in unusually high markdowns
and clearance levels in the second quarter" and "the lengthy
renovation and disappointing re-merchandising of its Home
departments," according to the earnings statement.
Indeed, lost faith is an apt description of Perry's assessment of
the company, as he said in an Aug. 9 letter "shareholders and
creditors have increasingly lost confidence in the company," adding
that the company could re-inspire his support if it brought back
Allen Questrom, former CEO and chairman, and Ken Hicks, former
president and chief merchandising officer.
The company remains under the leadership of interim CEO Mile
Ullman, however. A statement released Sept. 26 assured investors
that the company is "pleased with its progress thus far in [its]
turnaround efforts and the traction its initiatives are starting to
achieve." It said performance is achieving greater predictability
as purchase conversion improves both in store and on jcp.com due to
a return to its former strategies, and it expects positive
same-store results coming out of the third quarter and in the
Apparently, this was not confidence-inspiring enough for Perry.
The next day, J.C. Penney announced a public offering of 84 million
shares priced at $9.65 per share to raise money, which took place
on Oct. 1.
JCP shares have dropped 55% year to date, including a 29% slide in
the last month. Its P/B ratio of 0.85 is near a three-year low, and
P/S ratio is 0.16, near a 10-year low. The company has a cash
balance of $1.54 billion before the public share offering, with
$5.8 billion in long-term liabilities and debt.
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