JCPenney Announces Equity Offer Hours After CEO Ullman Denies Need To Raise Capital
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JCPenney Announces Equity Offer Hours After CEO Ullman Denies Need To Raise Capital
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The bad news just doesn’t seem to stop for J.C. Penney. The embattled retailer saw its shares fall dramatically in afterhours trading on Thursday after the company announced plans to issue 84 million shares, with Goldman Sachs as the sole underwriter. Goldman, whose own research department caused a massive double digit decline in the stock a few days ago with a scathing research report that called for shorting the company, has the option of selling an additional 12.6 million shares within 30 days. Hours before, the company’s controller had announced he was resigning.
Is JCPenney having troube financing itself? - Photo credit: Wikipedia
J.C. Penney will indeed raise capital, as the media had been speculating since last Friday. The company notes it is in the process of filing forms with the SEC to issue up to 96.6 million shares with Goldman Sachs acting as underwriter. “The Company intends to use the net proceeds from the offering for general corporate purposes,” read the statement released after market hours on Thursday.
After reports indicated the company run by Mike Ullman was looking to raise cash, J.C. Penney went on a media attack in order to show itself as a solid company from a financial perspective. Thursday saw the release of a statement where management notedit ‘is pleased with its progress thus far in the Company’s turnaround efforts and the traction its initiatives are starting to achieve.”
That same day, CEO Mike Ullman was reportedly in New York saying he didn’t see “conditions for the rest of the year that would warrant raising liquidity,” according to Trade the News. Ullman also added “vendors are very supportive, we are paying them on time and have not heard any issues with regard to factors,” contradicting a report in the New York Postthat suggested CIT is approving orders selectively and increasing fees. J.C Penney didn’t respond to Forbes’s request for comment.
J.C. Penney’s stock has been in free fall for some time now. After the Ron Johnson debacle, the company suffered through a boardroom battle that saw billionaire hedge fund manager Bill Ackman drop his entire stake in the company; Ackman had been the company’s major shareholder. News of the apparent capital raise last Friday made things worse. Beyond struggling with competitors like Macy’s, Target TGT +0.9%, and Kohl’s, J.C. Penney seems to be waging war against itself. And its bank.
Goldman Sachs is the sole underwriter of the stock issue announced on Thursday. Indeed, Goldman had also helped J.C. Penney raise more than $2 billion in fresh capital this year, apparently making its way toward the upper levels of the capital structure. Yet Goldman’s research team released a scathing report this week, telling investors a bankruptcy was a very real possibility and suggesting that clients buy CDS protection.
The continuing contradictions put further downward pressure on a stock that has already been hammered. With Goldman Sachs playing both sides of the deal, and CEO Ullman reportedly saying they won’t raise capital, only to see the company raise capital, it seems like management is also trying to figure out how to save the ailing retailer. The situation is so dire now that even Bill Ackman, who least nearly half a billion dollars on J.C. Penney, looks like he got a deal when he dumped his stake.
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