Editor’s note: This article was first published in February 2014; the share price of about $5, the 75% fall in 12 months and the description of all-time lows reflect that time. J.C. Penney later filed for Chapter 11 bankruptcy in May 2020. This February 2014 view is kept as a historical record and is not investment advice. J.C. Penney filed for bankruptcy protection in May 2020.
“So it could fall even further after all”…
The department store chain JC Penney, once a big bet of fund manager Bill Ackman, has now lost 75% of its value in 12 months, going from trading at $20 a share to just $5 today. And remember that back in 2007 this company was trading at $80.
Seeking Alpha points out that the company may need a cash injection to meet its obligations, while many investors think that if JC Penney switched off the lights for good, it would save more money.
Remember that Bill Ackman left his seat on the company’s board “disgusted” after failing to oust several executives he considered a cancer for the company. That cancer may now have spread, for investors who already see their entire investment at risk, since they believe the company is collecting every ticket it needs to end up slowly dying on the OTC markets.
It is not a market problem, because the companies in its sector are rising in value, so it is clearly a problem of business incompetence.
It is one of those companies an investor is tempted to buy into because of the steep fall it has suffered, and because, almost always, some “star” turns up at the last minute ready to rescue a company. However, the last time I thought that, after JC Penney’s heavy falls, it could only go up, it turned out it could also fall even further.
Right now, trading at all-time lows, its only support (floor) is $0. So it is not one to play.
See also: 6 life lessons I learned while day trading millions of dollars
Featured image: Mike Mozart, CC BY 2.0, via Flickr.
