Is J.C. Penney Company, Inc (NYSE:JCP) On The Verge Of Bankruptcy?

Posted by Lynn Eisler September 30, 2013 0 Comment 2290 views

The trouble-ridden J.C. Penney Company, Inc (NYSE:JCP) reduced its 2013-end cash reserves projections. It has now decided to issue around $1B in new shares and its stock plunged 13.15% on this news on Friday. The shares opened at a price of $9.53 which climbed to an intraday high of $9.67 and dropped to a close of $9.05. Approximately 0.256 million shares were traded on Friday and the average volume of shares traded over 30 days was 39.34 million. The company has a market capitalization of $2 billion.

The new shares offering

J.C. Penney Company, Inc (NYSE:JCP) said that the 84M shares in this offering have been priced at $9.65/share and that underwriters have an option to buy an additional 12.6M shares. On Thursday afternoon, the company’s board made the decision to sell the shares post all the discussions about different options via which cash could be raised. As per the stock-offering prospectus, as on 6 September, the company had $5.82M of total debt. This also means that raising more cash through debt is a difficult proposition.

A strategy that didn’t work

Myron Ullman, the company’s chief executive said that they could not risk losing out on supplier partner and associate confidence. He said that the company was concerned about the fact that the shares were almost at break-point level and selling some new stock was one way of easing that pressure. Ron Johnson, the previous Chief Executive made some attempts to improve sales in vain. And in 2012, the shares dipped by a shocking 25$.

J.C. Penney Company, Inc (NYSE:JCP)’s shares have been on a roller-coaster ride over the past 3 days. There was a drop, post research from Goldman and an additional drop after a capital-raising related report from Reuters. Again, post the share-sale announcement, the shares moved ahead on their downward trend that continued well onto Friday.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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