Since the novel coronavirus struck, the stock market has been unpredictable, to say the least. One of the most surprising trends over the past few weeks are renewed interest among retail investors in companies that have filed for bankruptcy. JCPenney (NYSE:JCP) is one such firm that saw its share price more than double in early June. But even for the riskiest of investors, JCP stock isn’t worth its 30 cent price tag.
The firm unsurprisingly filed for bankruptcy as it struggled to navigate through the challenging retail environment in a post-pandemic world. Some saw the move as an opportunity — after all, JCPenney could use the time to restructure and come back stronger than ever, right?
Wrong. In fact, JCPenney looks very unlikely to do much more than fade into the background as a relic of retail times past.
Discounted JCP Stock Sparks Acquisition Rumors
There’s a ton of acquisition speculation surrounding JCP stock right now and that could be a reason some investors are interested in holding onto it. A number of big names could benefit from buying JCPenney due to its location and vast real estate portfolio.
Chief among them is e-commerce juggernaut Amazon (NASDAQ:AMZN), which would benefit from owning brick-and-mortar stores that could be used as collection points for customers. Amazon has long struggled against its last-mile delivery costs, and owning physical retail space could ease that burden.
But AMZN isn’t the only one with its sights set on JCP. Authentic Brands Group LLC, Simon Property Group (NYSE:SPG) and Brookfield Property Partners (NASDAQ:BPY) are also considering buying JC Penney in a joint deal.
This wouldn’t be the first time Simon and Brookfield saved a failing retailer. The two bought Forever 21 at the start of the year.
JCPenney Could Live to See Another Day
If JCP’s mall landlords do eventually buy the beleaguered retailer, they’ll likely do everything in their power to reinvigorate the store. Their main motivation for keeping JCPenney is the fact that most of the smaller stores they house have agreements that stipulate the shopping center keeps two “anchor stores” on the premises. Losing JCP would mean renegotiating all of those contracts as well as a big headache for the landlords.
That’s the case for Brookfield and Simon. Authentic Brands reportedly has another motivation: intellectual property. According to Forbes, Authentic Brands is hoping to market some of JCP’s in-house brands separately.
If this scenario plays out, investors will lose. JCPenney is going to be worth even less if the firm is chopped up into that many pieces. It’s difficult to imagine the department store going on without its low-cost brands.
What’s Next for JCP Stock
JCPenney, it seems, wants to try to emerge from bankruptcy on its own. The company has until July 14 to come up with a game plan and submit it to the court. That’s not a ton of time to get lenders on board.
Again, the future of this scenario doesn’t look great for JCP stock owners. Of course, there’s a chance that the revived JCPenney would be a leaner organization with a better online presence and the ability to capture the attention of its customers.
But realistically, that’s a long-shot even the riskiest investors don’t want to take. The novel coronavirus has decimated the retail industry. The virus and resulting lockdowns fast-forwarded U.S. consumers to an era where contactless delivery reigns supreme. In short, it accelerated a wave of bankruptcies that was likely coming anyway.
Perhaps JCP could’ve struggled on for another year or so if the pandemic hadn’t struck, but ultimately the company has been trying to breathe life into its tired brand and outdated business model for years now. There appears to be very little chance of JCPenney making a successful comeback and that makes JCP stock worth avoiding at all costs.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
