PERRY CAPITAL CUTS STAKE IN J.C. PENNEY
c.2013 New York Times News Service
The hedge fund Perry Capital pared its stake in J.C. Penney by nearly half as the troubled retailer announced plans last week to raise as much as $932 million in fresh capital.
Perry Capital, based in New York, began to cut its stake Friday, coinciding with J.C. Penney’s disclosure of a planned sale of as much as 96.6 million new common shares. The company is shoring up its reserves as it undertakes a difficult turnaround. But the move dilutes the value of existing shareholders’ stakes.
On Aug. 9, Perry Capital disclosed for the first time that had acquired a 7.3 percent stake in the company. By Monday, its stake was just 3.3 percent, according to a filing with the Securities and Exchange Commission.
While Perry appears to have made a dash for the exit, several hedge funds and other investment firms have been adding to their holdings. In a filing Sept. 3, Glenview Capital said that it had increased its stake to 9.1 percent, from 3.8 percent in August. Soros Fund Management has also been adding shares and now has a 9.6 percent stake, according to its most recent SEC filing at the end of August.
Hedge funds began to pile into J.C. Penney around the same time that the hedge fund manager William A. Ackman, of Pershing Square Capital Management, sold his 18 percent stake, or 39.1 million shares, in the company.
Ackman sold his stake suddenly in August, after a public battle with other J.C. Penney directors that resulted in his resignation from the board. He sold his shares for $12.90 each, offering buyers a 3.4 percent discount to the trading share price at the time.
The question now is whether the retailer, still hobbled in the wake of missteps by its former chief executive Ron Johnson, can make a comeback. Johnson had been brought in by Ackman in an attempt to turn the business around.
But much of what Johnson changed — getting rid of discounts and revamping stores for a more upscale market — sent existing customers away without attracting new ones. Johnson was forced to leave earlier this year.
On Monday, the shares closed at their lowest level in more than a decade, falling 2.7 percent to $8.81. In comparison, the Standard & Poor’s 500 stock index fell 0.6 percent.