J.C. Penney Company, Inc. (JCP): Will Perry Capital And Vornado Also Sell?

On the company’s earnings call, Macy’s CFO blamed its struggles on the state of the consumer. What money consumers do have, they appear to be spending on goods that department stores don’t sell — cars, housing, and home improvement. In light of the recent weakness in teen retail, those remarks appear plausible.

Will Perry Capital and Vornado also sell?
Besides widespread weakness in the department-store business, J.C. Penney shares could be under further selling pressure. It’s worth remembering that Pershing Square wasn’t the only investment firm pushing for a change:  Vornado Realty Trust was working alongside Ackman.

Vornado sold 10 million shares in March, but that was only about half of its position. Vornado still owns a sizable chunk of J.C. Penney, and Vornado’s chairman Steven Roth remains a J.C. Penney director.

Likewise, Perry Capital is also a big holder of J.C. Penney shares. During the fight between Ackman and the rest of J.C. Penney’s board, Perry Capital bought 7.3% of the company, then sent a letter to the board supporting Ackman’s vision.

Given that Ackman is now out of the picture, it’s unlikely that Perry Capital will get what it wants. At the same time, Vornado could look to sell its remaining stake in the retailer.

Investing in J.C. Penney
At these levels, J.C. Penney might look like a bargain. Before Ackman bought in, J.C. Penney was trading near $20 per share. If CEO Mike Ullman can bring the retailer back to that level, shares have a 35% upside.

The problem is that the department-store business in general is challenged. Both Kohl’s and Macy’s have disappointed investors, drawing into question the overall strength of the consumer.

At the same time, Ackman wasn’t the only investor that bought a big stake in J.C. Penney. Vornado, as well as Perry Capital, supported Pershing Square’s vision, at least at one point in time. Though they may have changed their minds, it wouldn’t be unreasonable to think they could sell their stakes as well.

For those reasons, J.C. Penney continues to remain a highly speculative investment.

The article J.C. Penney Is No Better off Without Ackman originally appeared on Fool.com is written by Sam Mattera.

Sam Mattera has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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