Shares of J.C. Penney Co. Inc. hit a new 13-year low on Friday as investors digested its secondary stock offering of up to 96.6 million shares and wondered about its turnaround strategy.
The stock closed at $9.05 Friday, falling 13.2 percent, although the shares fell further in early after-market trading to $8.97. Shares of Penney’s had fallen even lower to $8.85 in intraday trading.
Friday’s sell off was the reflection in part of the unhappiness of some investors over a 30 percent dilution rate as a result of the secondary offering. The company priced the shares Friday at $9.65 each. The offering is expected to close on Tuesday. The offer is for 84 million shares, with its sole underwriter Goldman Sachs having an option to pick up another 12.6 million shares. Rumblings surrounded Penney’s last week that it was seeking to raise around $1 billion in cash to shore up its balance sheet. At $9.65 a share, the offering would raise up to $932 million if all the shares are taken up.
There was also some backlash Friday against Penney’s chief executive officer Myron “Mike” Ullman 3rd, who was said to have told a small group of investors at a meeting Wednesday that the company wouldn’t need to raise additional capital until the end of the year.
A Penney’s spokeswoman reportedly denied that Ullman ever said that at the meeting.
In the case at Penney’s, what might have also garnered the ire of investors was a filing with the Securities and Exchange Commission on Thursday by the company’s general counsel and secretary, Jan Dhillon.
In the filing, which updated the company’s business in a preliminary prospectus supplement connected with the secondary offering, the company said it is “pleased with its progress thus far in the company’s turnaround efforts and the traction its initiatives are starting to achieve. Moreover, the company said it is starting to see greater predictability in its performance across many areas. The company continues to be encouraged by improvements in purchase conversion both in store and on jcp.com, primarily due to being back in stock in key items and sizes the customer expects to find at J.C. Penney. Overall sales on jcp.com continue to trend double digits ahead of last year. The company still anticipates it will experience positive comparable store sales trends coming out of the third quarter and throughout the fourth quarter of 2013.”
The company’s business update also said: “Given the company’s current cash position, along with the undrawn portion of its credit facility, and not taking into account the net proceeds of this offering, the company currently expects to end the year with approximately $1.3 billion in overall liquidity.”
Penney’s said in August when it posted second-quarter earnings that it expected to end the year with $1.5 billion in overall liquidity.
Given the $1.3 billion projection stated in the regulatory filing by Dhillon, that raised the possibility that Penney’s cash-burn rate might be higher than expected.
Paul Lejuez, senior analyst at Wells Fargo, on Friday lowered his stock valuation to $4 to $5 a share, the second time he lowered the valuation in as many days. He lowered the share-price target to $6 to $7 from $10 to $11 on Thursday, before the announcement of the secondary public offering.
Lejuez also emphasized: “Our bearish call was never about bankruptcy.”
The analyst said that with the additional capital raised from the offering, “we believe the company would be able to fund its working capital and capital expenditures through 2014. While some may view this as a ‘lifeline,’ we never viewed bankruptcy as the primary concern for the stock (and still don’t). We assume liquidity would be there in one form or another when they need it.”
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty