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.”
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)