Bill Ackman's Pershing Square sells entire JC Penney stake

Scott Eelis | Bloomberg | Getty Images

Bill Ackman's Pershing Square has sold its entire stake in struggling department store retailer J.C. Penney, the company said in a statement and a filing.

The hedge fund had been the largest shareholder in the struggling retailer's stock, owning 39.1 million shares, or 18 percent of shares outstanding. Ackman's fund bought the shares at about $25, which means it stands to lose about $470 million, or about half of his initial investment.

Following the report, J.C. Penney shares dropped about 5 percent in after-hours trade before paring some losses. (Click here to track the company's stock.)

Pershing Square used Citigroup as the book runner for the deal. Citi will be offering shares at between $12.50 and $12.90, Dow Jones reported.

Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, recalled that this isn't the first failed retail move for Ackman, whose investment in Target also soured.

"Retail boards should be very scared if he comes a-knockin', as unlike Carl Icahn, Ackman is a value destroyer," Sozzi said.

The decision comes two weeks after Ackman left the retailer's board after a fight over top management's direction. He built his stake in J.C. Penney three years ago, before handpicking former Apple executive Ron Johnson to lead the company.

Johnson was ousted after just a year, however, and the company brought in former CEO Mike Ullman.

In recent weeks, Ackman's relationship with J.C. Penney's board has grown increasingly tense.

The board erupted into a fight over the retailer's future, as Ackman demanded a faster search for a CEO to replace Ullman and the board countered that he was being "disruptive and counterproductive."

J.C. Penney had no comment.