Bill Ackman is stuck with his Penney stock, for now
The activist investor has to hold onto his 18% stake for at least a while longer. Whether he'll sell later is another question.
As MarketWatch noted, Ackman may be able to sell shares once the company's second-quarter results are made public, but even then the billionaire faces limitations contained in his shareholder agreement. Ackman has repeatedly said he has no interest in selling his hefty position in the Plano, Texas, company even though he has taken an epic beating on his investment.
Ackman owns more than 39 million shares of Penney through his Pershing Square Capital Management, according to Penney's latest proxy. As of yesterday's closing price of $13.17 per share, that stake was worth $513.7 million. Ackman started buying shares in the retailer three years ago at prices ranging from $20.01 to $28.92 each, working out to a cost basis of about $25 per share, according to CNBC's Andrew Ross Sorkin. That puts his stake's original value at about $975 million, giving him a paper loss of more than 47%.
However, no one needs to hold a benefit to help out Ackman because of hiss woes at J.C. Penney. For one thing, Forbes estimates his fortune at $1.2 billion. Moreover, Ackman bears some responsibility for the mess the retailer is now in, thanks to his championing of ex-CEO Ron Johnson's disastrous strategy.
Ackman angered his fellow Penney board members by waging a campaign in the financial press to replace CEO Myron "Mike" Ullman, who ironically was the CEO Johnson had replaced. Analysts said Ackman was a disruptive influence on the board. Ackman seems to agree, saying in a press release that his departure and the addition of two new directors "is the most constructive way forward for J.C. Penney and all other parties involved."
Other hedge funds are starting to take a shine to the retailer despite Ackman's troubles. According to Reuters, billionaire George Soros' fund holds a 7.9% stake in the company and Glenview Capital Management "appears to be sitting tight on its 'passive' 4 percent stake."
The actors may have shifted positions, but the drama around J.C. Penney is far from over.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 added just over a point, holding its weekly gain at 1.0% while the Nasdaq lost 0.4%.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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