Did George Soros Just Give Investors a Reason to Like J.C. Penney?
With its epic losses on the stock chart — shares are currently trading more than 55 percent below where they were 12 months ago — the removal of its Chief Executive Ron Johnson, and a $552 million loss in the most recent quarter, J.C. Penney (NYSE:JCP) has been in the harsh spotlight of Wall Street for several months. But, despite the dark shadow its struggling business is casting, the company has caught the attention of hedge fund manager George Soros.
Soros disclosed a 7.9 percent stake in the retailer Thursday, with a filing made with the U.S. Securities and Exchange Commission showing he had acquired 17.4 million shares. However, his stake is passive, meaning that he will not attempt to exert influence on the company’s direction. Following the announcement, shares of J.C. Penney rose nearly 7 percent in after-hours trading and the stock continued to rise Friday morning, increasing as much as 8 percent to $16.47.
Now, at least two prominent hedge fund managers have taken an interest in J.C. Penney. The other, William Ackman of Pershing Square Capital, holds a 17.8 percent stake and his dealings with the retailer have been less than passive…
It was Ackman that hand picked the chief executive for the leadership role and publicly supported his turnaround efforts until nearly the end of Johnson’s tenure. When he landed the job, the former Apple (NASDAQ:AAPL) executive was charged with strengthening the company’s financials and making the retailer more competitive. But Johnson’s efforts to steer J.C. Penney away from its image as a discounter contributed to a 13 percent drop in customer traffic and a 25 percent fall in revenues in fiscal 2012. His attempt to attract a new type of shopper failed, and even he admitted he made “big mistakes” after the company reported earnings last quarter.
Ackman began criticizing Johnson around this time as well. At an investment conference sponsored by Thomson Reuters in early April, he expressed the belief that Johnson had made “big mistakes” and the impact of his turnaround plan was “very close to a disaster.”
Other shareholders have seemed to agree with this negative assessment because ever since former CEO Myron Ullman replaced Johnson several weeks ago, investors have bid the company’s stock up modestly. Ackman appears pleased as well, noting at luncheon this month that he does not “see a scenario in which we don’t work this thing out,” according to The New York Times. Furthermore, while it has not been clear what prompted Soros’s interest in J.C. Penney, his investment will likely give investors a reason to give the company a second look.