With the help of Citigroup Inc. J.C Penny will be offering its now open 39 million shares to new investors at $12.90 per share after Hedge-Fund manager Bill Ackman dumped his entire stake.
Ackman’s decision to dump his entire stake in J.C. Penny came after a failed bet on the retailer cost his fund over $600 million and lost thousands of jobs. While the chain of over 1000 stores currently held by the retail company struggles to right itself, just less than 18% of its stock has been opened for purchase. As an incentive for new buyers to invest in the company, J.C. Penny is offering new investors a special price of $12.90 per share.
Ackman resigned as J.C Penny’s board member earlier in August over conflicts with other members of the board became public news. The bad bet marks the third in line for the hedge-fund manager with other mistakes including an investment in former booksellers ‘Borders Group’ in 2006 and a proxy-fight at Target Corp. that ended in defeat in early 2009. The most recent mistake in J.C. Penny pushed the retail company deep into the red with a strategy supported by Ackman.
As the retail chain now struggles to regain a strong customer base and climb out of the large decline in sales, Ackman leaves the company stating that retail appears not to be a strong point. Bad decisions on the part of former CEO Ron Johnson included remove discounts and eliminating favorite house brands, which caused an almost immediate drop in J.C Penny sales of 25% or close to $1 billion in losses.
J.C Penny has employed over 150,000 workers at the part-time and full-time status for the previous 10 years but after taking serious losses from bad decisions has been forced to cut its employee size down to just under 116,000. Losses of this magnitude will be challenging to fix for the large retailer as sales continue to steadily decline but with the appointment of former CEO Myron Ullman the company hopes to right the wrongs.
Returning CEO Ullman told media in a statement that the road to recovery will be a difficult one, expecting new growth to occur over a longer stretch of time. Mr. Ackman and J.C Penny decided on the terms to which his 39 million shares of stock would be sold to the public and reports indicate that Ackman has also forfeited his rights to appoint a new board member in his place.
Pershing Square which currently holds over $11.7 billion in assets has agreed to sell its stock through Citigroup which in turn will be offered discounted shares to new investors at $12.90 per share, under the current stock value of just above $13 per share as of Monday. The deal has prompted speculation other investors such as Steven Roth may follow suit to Ackman and leave the board, in turn selling off his portion of shares in a similar manner.