Secondary JCP Stock Offering Shows Just How Desperate JCPenney Is

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

   

J.C. Penney (NYSE:JCP)JCPenney (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/.

©2016 InvestorPlace Media, LLC

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