JCPenney (JCP) shareholders have sprinted for the exits in the past week or so, and that number now includes hedge fund and top shareholder Perry Capital dumping JCP stock.
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.