J.C. Penney Company, Inc. (JCP) Takes Another Hit: Vornado Realty Trust (VNO), Macy’s, Inc. (M)

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J.C. Penney Company Inc. (NYSE:JCP)My brain is starting to cement J.C. Penney Company, Inc. (NYSE:JCP) and margaritas together in my thoughts -- whenever I hear either term, I think, "On the rocks." Yesterday's bad news came from two sources. It's been reported that investment fund Vornado Realty Trust (NYSE:VNO) has sold off a massive chunk of its J.C. Penney holding. According to The Wall Street Journal, Vornado is dumping 10 million shares, and cutting its losses. That has been the main driver behind the stock's 10% midday fall.

On top of that, yesterday the justice overseeing the Macy's, Inc. (NYSE:M), Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), and J.C. Penney litigation mess said that J.C. Penney may not ever be able to put Stewart's items on the shelves. The retailer has pressed ahead with the promotion and launch of the line, even as it's being sued by Macy's to stop the partnership. Judge Jeffrey Oing said that he may put the brakes on the whole operation, telling J.C. Penney Company, Inc. (NYSE:JCP)'s lawyers, "That's the risk your client took." Is there any hope in sight for investors and the business, or are we watching the last desperate gasps of an American dynasty?

It's not good news The move from Vornado Realty Trust (NYSE:VNO) is clearly the most troubling. The company bought into Penney alongside Bill Ackman back in 2010. In a rare spectacle, the big fund seems to be getting hosed just like the little guy. Vornado has already lost around $300 million on its position, with this newest sale adding to the fall. But the company isn't getting out completely. This sale represents close to 40% of the company's position, which last week accounted for 11% of J.C. Penney Company, Inc. (NYSE:JCP)'s outstanding shares.

The move is obviously an about-face on the company's outlook, and more subtly on the belief that CEO Ron Johnson can make the big difference that he was expected to make. At the time of the Vornado Realty Trust (NYSE:VNO) purchase, its CEO Steven Roth had effectively sworn off these sorts of big investments. With the buy, the trust made a bold and loud move. Roth himself said of the deal, "If you look at the math and you look at the investment, I think you'll agree it's a pretty terrific investment." Now that terrific investment -- made at over $25 per share -- is looking horrific.

The pronouncement from Judge Oing just compounds the misery. Not only does J.C. Penney now have to worry about a lawsuit sucking cash out of the company, it also has to worry about sunk investment costs associated with the Martha Stewart shops. Those costs cut into Martha Stewart, as well. The company reported $800,000 worth of J.C. Penney Company, Inc. (NYSE:JCP)-Macy's, Inc. (NYSE:M) related legal fees last quarter.

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