J.C. Penny shares sink ahead of stock sale
A J.C. Penney store in New York.(Photo: Mark Lennihan, AP)
Story Highlights
- J.C. Penney shares closed down 2.7% to $8.81, lowest since October 2000
- Struggling retailer is set to raise $904 million in stock sale at $9.65 apiece
- Concerns are that department store chain won't have enough cash for holiday shopping season
The stock price of struggling retailer J.C. Penney hit a 13-year low Monday after another one of its biggest institutional investors cut its stake by nearly half.
During regular trading hours, the stock closed down 24 cents, 2.7%, to $8.81 and fell another 3 cents in after-hours trading. The last time the stock was trading below $8.80 a share was in October 2000.
REBOUND: J.C. Penney faces long recovery after tumult[1]
The shares have slid 55% so far this year vs. an 18% gain for the benchmark Standard & Poor's 500 index. And the company has a rough road ahead of it. It hired Goldman Sachs to help it sell more than $900 million in new stock to raise cash ahead of the crucial holiday shopping season and to quell rumors that it may face a liquidity crunch in coming weeks.
According to a report by Bloomberg News Service Monday, the Plano, Tex.-based company will sell 84 million shares at $9.65 a piece with the option to sell an additional 12.6 million shares within 30 days of the sale.
HOLIDAYS: Retailers expected to hire less help this year[2]
Plans for the sale were announced last week at which time Michael Binetti, an analyst at UBS AG in New York, said the new stock will dilute the value of the outstanding stock by about 30%.
A filing with the Securities and Exchange Commission made public Monday shows Perry Corp. sold about 9 million shares of J.C. Penney stock, leaving the investment firm with roughly 10 million shares in its portfolio, about 3.3% of the retailer's outstanding stock, according to a Bloomberg news report. Perry has lost about $41 million on its investment since Aug. 9.
STORES: J.C. Penney dumping Martha Stewart line, report says[3]
Perry had announced its 19 million-share stake in J.C. Penney on that date, backing efforts by hedge fund activist Bill Ackman, then a director of the retailer, to oust CEO Mike Ullman and Chairman Mike Engibous.
Ackman and his firm, Pershing Square Capital Management, were unsuccessful in garnering support for his ouster efforts. He quit the board and sold his entire stake in the company at an investment loss of $500 million.
Ullman replaced former Apple executive Ron Johnson as CEO in April and since his return to the corner office, the retailer has borrowed about $3.1 billion to stay afloat. It is in the process of abandoned Johnson's turnaround strategy and returning to the sales and discounting policies that had become a mainstay under Ullman.
Perry has lost about $40.7 million since Aug. 9 on the 10 million shares he still holds.
Ullman has been working with Goldman Sachs Group Inc. on a share offering to raise as much as $932 million, before underwriting discounts. That would help J.C. Penney get through the holiday season and fund its attempt to rebound from Ullman's predecessor's failed attempt to transform the retailer.
J.C. Penney, based in Plano, Texas, fell 0.5 percent to $8.76 in extended trading at 7:11 p.m. New York time.
References
- ^ http://www.usatoday.com/story/money/business/2013/08/13/jc-penney-future/2650283/ (www.usatoday.com)
- ^ http://www.usatoday.com/story/money/business/2013/09/23/holiday-hiring-outlook/2854365/ (www.usatoday.com)
- ^ http://www.usatoday.com/story/money/business/2013/09/05/jc-penney-dumps-martha-stewart-product-line/2770967/ (www.usatoday.com)