Why Do Hedge Funds Love J.C. Penney?
Shares of the department store hit their lowest level in 13 years after the company announced it would raise almost a billion dollars to shore up its weakening balance sheet
The development raises not only credibility questions about management, which said it wouldn't need to raise more equity, but also liquidity concerns for one of the nation's biggest retailers.
(Check out: 3 Stocks to watch)
Curiously enough, despite the incredible sell-off, and apparent dysfunction, some of the savviest investors have taken considerable equity stakes in J.C. Penney, including George Soros's Fund Management, Richard Perry's Perry Capital and Kyle Bass's Hayman Capital.
Current Top Shareholders:
1. Glenview Capital Management: 20.06 million shares, 9.1% ownership
2. Soros Fund Management: 19.99 million shares, 9.06% ownership
3. Perry Corp: 19 million shares, 8.6% ownership
4. State Street Corp: 17.18 million shares, 8.06% ownership
5. UBS Securities: 13.19 million shares, 6% ownership
6. Hayman Capital: 11.43 million shares, 5.18% ownership
From a fundamental level perspective, the company has been a disaster, posting declines in both sales and earnings for the past five years.
Annual Sales, Profit/Loss, EPS history:
Fiscal Year 2012 $12.99B ($985 M)
Fiscal Year 2011 $17.26B ($152 M)
Fiscal Year 2010 $17.76B $389 M
Fiscal Year 2009 $18.49B $251 M
Fiscal Year 2008 $19.86B $572 M
So why would the so-called smart money want to take a stake in this battered retailer? Click the video above to find out.