Secondary JCP Stock Offering Shows Just How Desperate JCPenney Is

by Alyssa Oursler | September 27, 2013 11:37 am

Secondary JCP Stock Offering Shows Just How Desperate JCPenney Is

JCPenneyPromo Secondary JCP Stock Offering Shows Just How Desperate JCPenney IsJCPenney (JCP[1]) would probably argue against the age-old saying that “all press is good press.” JCP stock[2] has been pounded this week — both the cause and effect of endless bad news surrounding JCPenney.

The latest headline: JCPenney[3] is planning to sell 84 million shares[4] 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[5]) 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[6], or $1 per share.

JCPenney stock did rebound slightly on Thursday — either because JCP released a vague press release[7] 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[8]) and Target (TGT[9]) 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[10] 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.

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. JCP stock: http://investorplace.com/2013/09/jcp-jcpenney-stock/
  3. JCPenney: http://investorplace.com/2013/09/jcp-stock-jcpenney/
  4. sell 84 million shares: http://www.cnbc.com/id/101065737
  5. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  6. JCPenney has a total liquidation value of $324 million: http://investorplace.com/2013/09/jcpenney-stock-citigroup-analyst/
  7. vague press release: http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsArticle&ID=1859048&highlight=
  8. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  9. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  10. wider-than-expected loss: http://investorplace.com/2013/08/jcpenney-earnings-jcp/

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