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.

This story first appeared in the September 30, 2013 issue of WWD. Subscribe Today.

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, primarily due to being back in stock in key items and sizes the customer expects to find at J.C. Penney. Overall sales on 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.”

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