Some people in the investment community are speculating that Bill Ackman of Pershing Square Capital Management might be considering of exiting its investments from J.C. Penney Company, Inc. (NYSE:JCP) and are saying that his bet in the beleaguered department store chain might end up as as worst investment blunders of the hedge fund.
The stock price of J.C. Penney Company, Inc. (NYSE:JCP) is again trading downwards by more than 11 percent to around $14 per share around 2:33 PM on In New York on Tuesday, April 9.
According to the report from Svea Herbst-Bayliss and Katya Wachtel of Reuters, Ackman is possibly looking for a way to exit from his stockholding in J.C. Penney Company, Inc. (NYSE:JCP)) because of the fact that his hedge fund is suffering millions of dollar in losses. Ackman’s bet in the company also tainted his reputation.
People familiar with the situation of the struggling department store chain commented that best way to exit is to sell some of J.C. Penney’s assets or to take the company private. Pershing Square Capital Management’s paper losses in the company were approximately $500 million.
George Bradt, managing director of executive consulting firm, PrimeGenesus commented, “The faster Ackman and group sell JCP’s valuable assets to someone else, the more value they will capture. The longer they stay distracted with sure-to-fail ideas like fixing the business or taking it private, the less value will be left when JCP finally ceases to exist.”
Private equity investors have wanted to take J.C. Penney Company, Inc. (NYSE:JCP) private prior to entry of Pershing Square Capital Management and Vornado Realty Trust in 2010. The stock price of the company at $14 per share is $6 cheaper than the original price when Ackman started purchasing his stake in the company.
Analysts believed that JC Penney is still attractive for private equity firms including Apollo Global Management LLC (NYSE:APO), The Blackstone Group L.P. (NYSE:BX), and KKR & Co. L.P. (NYSE:KKR). The primary reason is the fact the department store chain owns valuable real estate assets.
Ackman believed that J.C. Penney’s real estate assets is one of the reasons that company should be trading higher than its current stock price. He previously stated that Pershing Square Capital Management should gain 15 times if the turnaround strategy of its CEO Ron Jonson was effective, but it failed.
Johnson was criticized by making many missteps in his effort to revive the company. The company dismissed Johnson from his position. However, since the disappointing earnings result of J.C. Penney Company it had been rumored that Johnson was planning to leave the company. During a previous Thomson Reuters conference, Ackman described Johnson’s tenure as “something close to a disaster.”
The stock price of J.C. Penney Company, Inc. (NYSE:JCP) increased by nearly 11 percent on reports that Johnson was fired, but the stock plummeted when the company announced that Mike Ullman as back to serve as interim CEO.
An investor from Pershing Square Capital said, “What we have now is clearly the worst case scenario and Bill will be looking to make as graceful an exit as quickly as possible.”