J.C. Penney Company, Inc. (NYSE:JCP) is raising as much as $932 million from selling equity. The embattled department store chain is offering 84 million shares of its common stock to the public for $9.65 per share.
J.C. Penney stock offering
According to J.C. Penney Company, Inc. (NYSE:JCP), the underwriters have a 30-day option to purchase an additional 12.6 million shares. Goldman Sachs Group Inc. (NYSE:GS) is the only book-running manager for the stock offering.
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The stock price of J.C. Penney Company, Inc. (NYSE:JCP) suffered a significant decline on Wednesday on concerns that it might be facing liquidity problems. Goldman Sachs analysts Kristin McDuffy noted that the department store chain might not have enough cash in the third quarter to maintain its business operations because of a combination of factors such as weak fundamentals, inventory rebuilding, and an underperforming home department.
J.C. Penney stocks rise and fall
The analyst added that J.C. Penney needs a bigger liquidity buffer to safeguard against potentially poor 4Q holiday season. The stock plunged 15 percent on the report, but regained some of its value the following day after Citi Research analyst, Deborah Weinswig, reported that the company has enough liquidity for 2013. However, Weinswig said J.C. Penney Company, Inc. (NYSE:JCP) might need to raise additional cash to cushion against a potential challenging season.
The management of J.C. Penney also released a statement yesterday indicating that the sales of the department store chain are improving and it is pleased with the progress of its turnaround efforts, which helped the stock to move a bit higher.
The analysts noted that the department store chain is burning cash faster than expected.
J.C. Penney cash generation
J.C. Penney Company, Inc. (NYSE:JCP) said it has approximately $1.3 billion cash by the end of 2013. The amount is $200 million less than its estimate last August 19. If the company completes the sale of its 84 million shares, its total available cash would be about $2.2 billion.
Commenting on the latest move of the company, UBS analyst Michaek Binetti said, “While an equity raise improves (near-term) liquidity, we remain concerned that JCP will continue to burn cash in ’14 and beyond.” Binnetti has a sell rating for the shares of J.C. Penney Company, Inc. (NYSE:JCP).
Kristin Hays, spokesperson for J.C. Penney Company, Inc. (NYSE:JCP) denied a report from CNBC that its CEO Mike Ullman told investors that the company does not need to raise additional cash before the end of its fourth quarter. According to Hays, the company decided to execute the stock offering because of concerns regarding its financial stability. Hays said, “This is not because of panic, it’s to be prudent.”