Secondary JCP Stock Offering Shows Just How Desperate JCPenney Is

There's still no reason to risk your money with JCP stock

   

Secondary JCP Stock Offering Shows Just How Desperate JCPenney Is

JCPenneyPromo Secondary JCP Stock Offering Shows Just How Desperate JCPenney IsJCPenney (JCP) would probably argue against the age-old saying that “all press is good press.” JCP stock has been pounded this week — both the cause and effect of endless bad news surrounding JCPenney.

The latest headline: JCPenney is planning to sell 84 million shares of JCP stock in a secondary offering with the hopes of raising more nearly $900 million. JCPenney will use the proceeds for “general corporate purposes.”

Translation: JCP is as desperate as ever.

Goldman Sachs (GS) is the sole underwriter for the new JCPenney stock offering, and has a 30-day option to buy another 12.6 million shares of JCP stock.

Investors should also remember that on the other side of Goldman’s business, its analysts released a note Wednesday suggesting that clients buy credit-default swaps on JCP — in other words, that they should bet on the company to default. JCP stock got absolutely pummeled as a result, to the tune of 15% one-day losses.

Other bad news for JCP stock came this week when Citi released a noted saying JCPenney has a total liquidation value of $324 million, or $1 per share.

JCPenney stock did rebound slightly on Thursday — either because JCP released a vague press release assuring folks that progress was going great (suuuuure, JCP) or because a few investors thought it would be a good idea to go bottom-fishing.

Either way, those JCP investors got burned, with JCPenney stock sitting nearly 10% in the hole so far today to bring JCP stock’s five-day losses to more than 25%.

That extends a year-long slump — sparked by former Apple (AAPL) and Target (TGT) star Ron Johnson’s leadership that booted sales from the Penney equation — that has seen JCP stock slide a whopping 60%.

Even bringing back sales at JCPenney and then giving Johnson the boot wasn’t enough to bring back JCP shoppers, with the company posting a wider-than-expected loss on another double-digit sales decline in the most recent quarter.

Of course, that part of the JCP news reel is anything but news. The struggles at JCPenney have been well-documented — part of the reason I warned investors to stay away from JCPenney stock on Tuesday, just before the sad JCP story morphed into a circus.

That advice still holds true — just because a company like JCP is offering shares doesn’t mean you should buy them.

Unless you’re a master at day trading, avoid JCP stock for now. All short-term recoveries in JCPenney stock have been followed by a move even further south, and trying to time a change in direction is a fool’s game.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/09/jcp-stock-secondary-offering/.

©2014 InvestorPlace Media, LLC

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