York Capital Management, a fund fund founded by James Dinan bets that the struggling retailer J.C. Penney Company, Inc. (NYSE:JCP)'s poor performance will continue. York Capital is shorting debt of the struggling retailer. With this, he will take on J.C. Penney Company, Inc. (NYSE:JCP)'s biggest shareholder, hedge fund manager William Ackman. While speaking at an investing conference organized by Morgan Stanley (NYSE:MS), Dinan said that York Capital Management, which has $15.1 billion in AUM, is shorting the retailer's debts.
William Ackman of Pershing Square has been the biggest cheerleader of J.C. Penney Company, Inc. (NYSE:JCP) since he began purchasing its stock in 2010. Ackman owns 18.2 percent or about 39 million shares of J.C. Penney Company, Inc. (NYSE:JCP). However, he seems to be struggling with double difficulties at the same time. He has taken a massive $1 billion short position in nutritional supplements maker Herbalife Ltd. (NYSE:HLF), where investing legends like Carl Icahn and Daniel Loeb have both taken long position. Ackman's position in Herbalife Ltd. (NYSE:HLF) is turning sour.
Ackman's another big trade - J.C. Penney Company, Inc. (NYSE:JCP) isn't showing any positive signs either. In 2011, he became a director of the middle-market department store chain, and brought Ron Johnson, the former head of Apple Inc. (NASDAQ:AAPL)'s retail business to lead a turnaround of the retailer. Johnson's strategies don't show any signs of turnaround. The company's fourth quarter sales dropped 31.7 percent. As a result, its shares have tumbled 24 percent this year so far. Amid this disappointment, Vornado Realty Trust (NYSE:VNO), which started investing in J.C. Penney Company, Inc. (NYSE:JCP) with Ackman, dumped 40 percent of its stake in the company.
York Capital's James Dinan is not alone betting against the retailer. The high yield bond desk of Morgan Stanley (NYSE:MS) is betting against the Plano, Texas-based company's bonds. Many hedge fund titans are shorting the stock. In fact, JC Penney was the third most heavily shorted stock last week in the Russell 1000 Index, says Bespoke Investment Group.
Talking about Bill Ackman, James Dinan said his activist behavior used to force change a company works big time when the tide is rising. Looking at the current scenario, Ackman's bet on the middle-market retailer could prove more damaging to his reputation and performance than his short bet on Herbalife Ltd. (NYSE:HLF).
J.C. Penney Company, Inc. (NYSE:JCP) shares were down 1.92 percent to $14.82 at 11:01 AM EDT.