J.C. Penney shares soar on Soros buy
The billionaire hedge fund manager has taken a 7.9% stake in the beleaguered retailer, but investors may be reading too deeply into the news.
By Jonathan Berr 3 hours ago
Shoppers at a J.C. Penney store in New York (copyright Mark Lennihan/AP)Shares of J.C. Penney (JCP +11.55%) surged more than 11% Friday on news that billionaire George Soros had taken a 7.9% stake in the beleaguered retailer.
Investors, though, need to keep this development in perspective. The 17.4 million shares were acquired by Soros Fund Management LLC, a hedge fund that reportedly controls about $25 billion in assets.
So the investment in J.C. Penney, worth about $281 million at current prices, is relatively small potatoes for the Hungarian-born financier. In fact, Soros, the company's chairman, wasn't personally involved in the decision to make this investment, according to CNBC's David Faber.
Whether Soros actually has faith that new CEO Myron (Mike) Ullman will be able to rescue the retailer from the damage left by predecessor Ron Johnson remains to be seen. Faber pointed out that Soros may be hoping to benefit from a short squeeze, which would hurt investors who are betting that the stock will fall. He also may view the investment as a short-term trade.
Soros isn't the only -- or the biggest -- stakeholder in J.C. Penney among well-known hedge fund managers. Activist investor Bill Ackman's Pershing Square Capital LLC reportedly owns a 17.8% stake in the in the Plano, Texas-based retailer.
J.C. Penney is reportedly strapped for cash, and is trying to raise $1 billion, according to Bloomberg News. Earlier this month, The Associated Press reported that the company borrowed $850 million to replenish store inventory. Soros, with a fortune estimated at $19.2 billion, has plenty to lend.There may be even more urgency to the company's quest for cash: The retailer is facing a slew of lawsuits, Bloomberg says, from contractors who say they weren't paid for store upgrades ordered by Johnson -- who was ousted earlier this month.