Shares of J.C. Penney Co. Inc. fell 2.8 percent Thursday to $12.40, although the stock hit a new 52-week low in intraday trading at $12.26.
This story first appeared in the August 30, 2013 issue of WWD. Subscribe Today.
The closing price is below the $12.60-per-share price in connection with the nearly 39.1 million shares sold by former board member William Ackman.
Ackman’s Pershing Square Capital Management on Monday said it was selling its 17.7 percent stake in Penney’s. While the shares were priced at $12.90 a share, a regulatory filing by Penney’s with the Securities and Exchange Commission shows that Citigroup as the underwriter purchased the shares from Ackman for $12.60 a share. The aggregate purchase price for the 17.7 percent stake was nearly $492.4 million. Ackman, whose average cost per share was $24.50, lost at least $464.1 million in his Penney’s investment.
Penney’s filing was a prospectus indicating that the shares would become available for purchase, typically known in financial parlance as a secondary offering.
The prospectus said that Citigroup “proposes to offer the shares of common stock from time to time for sale in one or more transactions or otherwise, at market prices prevailing at the time of the sale…” Regardless of when those shares are sold, Penney’s will not receive any of the proceeds from the sale of the stock. Citigroup, since it is selling the shares, will receive the proceeds from any sale.
Earlier this month, Ackman and Penney’s board were involved in a directors’ conflict in which Ackman sought the ouster of board chairman Thomas Engibous and the acceleration of a chief executive officer search to replace current ceo Myron “Mike” Ullman 3rd. The activist investor also had concerns about the company’s capital investment plans, cost controls, inventory management and business planning processes. Ackman also added fuel to the fire when he made public letters he sent to the board outlining his dissatisfaction with the pace of change.
The activist investor lost that fight and then subsequently resigned from Penney’s board.
Shortly after Ackman’s resignation, Penney’s board adopted a shareholder rights plan for a term of one year.
The plan, known as a poison pill, is an antitakeover mechanism to discourage new investors from gaining control of the company.
The retailer said the plan was not adopted in response to any effort from an investor to acquire control of Penney’s.