More on J.C. Penney's offering


Underwriters have a 12.6M-share overallotment option, and Goldman is the sole bookrunner. J.C. Penney (JCP) only says it will use the proceeds for "general corporate purposes." (PR)

Depending on the use of the overallotment option, the offering stands to increase Penney's share count by 38%-44%.

Zero Hedge wonders if Penney is in violation of SEC Rule 10b-5, given CEO Mike Ullman reportedly told investors his company doesn't see the need to raise capital this year, and will see how it does in FQ4.

Shares now -5.7% AH.

Earlier: J.C. Penney announces 84M-share stock offering

Update: A Penney spokeswoman denies Ullman told investors his company doesn't need to raise more capital this fiscal year. She says he simply told them Penney has enough liquidity.

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Comments (13)
  • Randal James
    , contributor
    Comments (4421) | Send Message
     
    "general corporate purposes" - one way to lower your loss per share is to dramatically increase the number of shares. Downside: if someone notices.

     

    I'm afraid this is the end of the ninth for this iconic American brand.
    26 Sep 2013, 05:48 PM Reply Like
  • Star Weekly
    , contributor
    Comments (164) | Send Message
     
    I smell class action lawsuit in the making.
    26 Sep 2013, 06:25 PM Reply Like
  • Star Weekly
    , contributor
    Comments (164) | Send Message
     
    Yes, it has started:

     

    http://yhoo.it/19N6GTT
    28 Sep 2013, 08:46 AM Reply Like
  • Phill Stone
    , contributor
    Comments (78) | Send Message
     
    They certainly had a good run of it, didn't they? 111 years is a long time. However, they certainly self-destructed in a highly entertaining fashion... "we don't need to put on sales" lol..
    26 Sep 2013, 07:32 PM Reply Like
  • karmike
    , contributor
    Comments (190) | Send Message
     
    Don't think you could really say that they "self destructed".....it was more of a "murder" by two rich, stupid, rich kids with too much time and money on their hands!
    26 Sep 2013, 09:16 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2866) | Send Message
     
    Its got to be close to a violation of SEC rules, that was the first thing I thought of when I saw the announcement.
    26 Sep 2013, 08:32 PM Reply Like
  • Randal James
    , contributor
    Comments (4421) | Send Message
     
    Mike

     

    I don't think so. It is up to the individual to say yes or no to these new shares. there are smart people who see a future for JCP. I don't, but I've about decided my retail ball is murky.
    26 Sep 2013, 08:46 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2866) | Send Message
     
    Individual investors dont have a yes or no vote on 44% dilution. If the CEO said they didnt need to issue shares, and then they did, thats a grey area. If CNBC just ran a headline that wasnt true, they should be fined as well. But it has nothing to do with the individual.
    27 Sep 2013, 12:03 AM Reply Like
  • Randal James
    , contributor
    Comments (4421) | Send Message
     
    Mike,

     

    I wasn't clear enough. These shares are going to come to market and investment banks will distribute them to interested clients. Perhaps many shares have already been spoken for. But all of us have the choice to say "Boy howdy! Gimme some of that!" Or not. I surely didn't mean it was a votable situation.

     

    One of the peculiarities of companies in trouble is the well-intended but self-destructive loyalty of shareholders who have lost 20% or even 50% and just hang on as if the turnaround must be right around the corner. In most cases, they'd do much better to take the loss and either move on or at least stay away until things stop getting worse. As we are talking retail here, how about Coldwater Creek?

     

    By the time the company is in deep do-do, the alternatives are things like financing receivables, issuing equity to offset losses, or those debt-for conversion deals that wipe out ownership. However, just like on most highways, there are signs: Reduce Speed Ahead, Sharp Curve., Falling Rocks (Stocks?) and so forth. Ignore the commonest of signs at your peril.

     

    The risk of leaving before a turnaround is underway (if ever) is that someone comes along with their own route to the promised land and does a buyout for more than you sold for. Attentive investors could have been out of these issues at much higher levels than any prudent takeover will offer.

     

    If I was long - and still viewed as competent enough to make my own investment decisions - I would take this as a swell time to reconsider whether I wanted to be in this retail category. If so, investors have been treated a whole lot better at Target, Costco, or even Kohl's. Bed Bath just reported nicely and increased their rosy expectations. Trends are friends and JCP has lost too many friends.
    27 Sep 2013, 02:06 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2866) | Send Message
     
    I gotcha. I agree that JCP is in a world of trouble, especially since all the Christmas merchandise would have been ordered in the spring, so there's little that can be done until next year if the previous management didnt order the right things. I might try to get in for a quick bounce if I feel like gambling, but too many large shareholders have dumped, and now JCP is selling shares at all time lows - neither of which is a good sign long term. The bonds backed by the real estate are something I plan at researching over the weekend.
    27 Sep 2013, 12:56 PM Reply Like
  • blackbeardz
    , contributor
    Comments (43) | Send Message
     
    "Penney spokeswoman Kristin Hays denied an earlier CNBC report that said CEO Mike Ullman told investors on Wednesday that the retailer did not see the need to raise more money before the end of the fourth quarter, which ends in early February. She said that Ullman had only said Penney had sufficient liquidity and that the comment was misinterpreted."
    http://yhoo.it/15z2sU5
    I new he was a snake, can't blame him for talkn' his book. It won't help now with 38%-44% dilution.
    26 Sep 2013, 11:49 PM Reply Like
  • Eric Jhonsa
    , contributor
    Comments (1276) | Send Message
     
    Thanks. Added an update to the post.
    26 Sep 2013, 11:55 PM Reply Like
  • blackbeardz
    , contributor
    Comments (43) | Send Message
     
    "Mike Ullman, reportedly told investors at a meeting that the company had no plans to do so anytime soon, according to two sources who attended the meeting Wednesday morning." http://cnb.cx/1fNER44
    - love it, the storm has just begun.
    27 Sep 2013, 02:40 PM Reply Like
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