Prominent Hedge Fund Hears Crickets for J.C. Penney

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Penney

Kyle Bass’s hedge fund, Hayman Capital Management, disclosed in September that it held 11.4 million shares in J.C. Penney (NYSE:JCP), a stake that amounted 5.2 percent of the company’s outstanding stock at the time. When compiling the stake, Bass expressed a bullish view on J.C. Penney. But by the end of the month, the firm’s stake had been cut in half.

The selloff was prompted by the retailer’s decision to sell 84 million shares in a public offering in order to raise cash for its turnaround attempt, a move that diluted Hayman’s investment. With J.C. Penney shares close to 40 percent below early-September levels and the fact that November sales missed estimates, the hedge fund decided to close out its position. On Thursday, Bass announced in an interview on Bloomberg Television that his firm had sold its stake in J.C. Penney’s stock. Following his comments, shares dropped 8.6 percent to $8.83 percent. Including that fall, shares have lost 51 percent of their value this year.

But while J.C. Penney’s stock price is still plummeting, the company’s sales are increasing. On Tuesday, the company reported that same-store sales, a key indicator of retail health, rose 10.1 percent over the past 12 month period — which included the important Thanksgiving holiday. In particular, sales increased 0.9 percent in the month of October and 10 percent in November, ostensibly proof that J.C. Penney’s promise of revenue growth beginning in the third quarter had come true. Comparatively, same-store sales dropped 32 percent in the fourth quarter of last year.

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