Perry Capital was one of a few hedge funds that took the bull defense for struggling JCPenney stock back in August, right around the time Bill Ackman of Pershing Capital stopped holding his breath for a JCP turnaround.
But as JCPenney stock was whittled down ever further last week — thanks in large part to an unexpected secondary offering underwritten by Goldman Sachs (GS) — Perry Capital whittled its JCP bet down as well. A recent filing shows the fund ditched nearly half of its JCP stock holdings in late September.
For fans of the retailer searching for a bright spot in the recent spiral of JCP news, optimism is getting harder and harder to find. JCPenney stock opened to gains of around 3% this morning, but even today’s mini-recovery for JCP has already dwindled to 1% range.
And that’s a drop in the bucket considering shares of JCP stock touched their lowest level since 1982 at one point yesterday, and that JCPenney has lost 30% of its value in the past five days alone. Things only get uglier as you zoom out on JCP. Year-to-date losses are 55%, while 12-month losses are close to 65%.
Really, you can find negativity almost everywhere you look:
- Analysts seem to think JCP stock has further to fall. Last week, Citi released a note saying JCPenney has a liquidation value of just $324 million, or around $1 per share before the new offering.
- Options contracts for JCP are betting on more downside, too. According to The Wall Street Journal, the top contract on Friday needs JCPenney stock to fall to $4 per share to profit. That’s less than half the current price tag for JCP stock.
- Before that, short sellers already were piling into JCPenney stock. As of mid-September, just less than 47% of the float was sold short — a hefty 71.72 million shares.
Perhaps most damning of all is that even JCP shoppers don’t seem eager to give JCPenney another shot. Sales are expected to drop by another 7% this year.
The result: JCP is expected to post a loss of $6.16 per share — 75% wider than the ugly loss the retailer took a year ago.
If so, you’d have to wonder how much longer Perry Capital’s remaining stake will last.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.