by Burke Speaker | December 6, 2013 8:49 am
JC Penny (JCP) is having a big PR crisis with Kyle Bass’ hedge fund Hayman Capital dropping its JCP stock. The hedge fund still holds JCP debt.
Back in September, Hayman disclosed a 5.2% stake in JCP; in November it reported a reduction to some 1.8%.
The loss caused JPC stock to fall 9% yesterday, and still down 1.5% pre-market.
In August, Hayman announced its buy-in — during a time big name investors like Bill Ackman were still on board. Since then Ackman has jumped ship as well as Perry Capital’s Richard Perry dropping his JCP stock by half.
JC Penny sales boomed in November and investors responded warmly as JPC stock seemed to be on the upswing, rising more than 6% during its growth.
JCP announced this week that comparable-store sales rose for the second straight month in November, due in large part to aggressive discounts and a return of some in-house brands. It credits those moves to helping shopping come back to its stores.
But as Charles Sizemore noted, the departure by Bass is going to bring mayhem back to JC Penny.
The aggressive buying by Bass — and of several other highly followed investors, including George Soros, Whitney Tilson and Jeremy Grantham — was one of the greatest bullish arguments for the company. JCPenney CEO Mike Ullman also recently put a million dollars of his own money into JCP stock, very visibly showing the world that management — along with the hedge fund masters of the universe — had faith in the turnaround.
Bass’ departure throws a nice big bucket of cold water on this argument.
There’s no denying that JC Penny is having a rough time of late. JPC stock has fallen 55% year to date. That’s bad enough, but coming off 2012 — one of the retailer’s worst years ever when sales fell 25% and JCP stock plummeted by 45%– the company woes are causes major investor concerns.
Margins have fallen each consecutive quarter though the company keeps trying to tout its sales increases — which investors shrug off as just the work of the super sales pricing by JC Penny.
As InvestorPlace noted yesterday, JCP seems to be on a race to the bottom (click on the link to see the stock’s big year wins and losses):
Shares of JCP stock had been regaining a bit of momentum in recent months, but they got yet another haircut yesterday. Investors were unimpressed by the company’s second-straight month of improving same-store sales, and were disappointed by the increase in overall sales.
All in all, shares of JCP have lost over half of their remaining value so far in 2013. In fact, the damage to the company’s share price (and subsequently its market cap) was so bad that a beaten-down JCP stock actually got booted from the S&P 500 a few weeks back.
All in all, this most recent news gives JCP investors reasons to worry — and what could be just another nail in the coffin that insiders have been speculating about for some time now.
Source URL: https://investorplace.com/2013/12/kyle-bass-jcp-stock-jc-penny/
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