BOSTON Nov 14 Retailer J.C. Penney drew
two prominent new institutional shoppers in the third quarter
even as an ambitious overhaul fizzled and its stock price
Hedge funds Jana Partners and Farallon Capital Management
Group took positions in the ailing department store operator.
Barry Rosenstein's Jana Partners and Farallon, founded by
Tom Steyer, each bought 500,000 shares in the Plano, Texas-based
company during the quarter, regulatory filings made with the
Securities and Exchange Commission on Thursday show.
Two one-time backers of the company had second thoughts,
however. Richard Perry's Perry Capital sold 2 million shares,
leaving him with 10 million shares at the end of the quarter.
And Tiger Consumer Management liquidated its entire position,
5.43 million shares.
In April, the company in April parted ways with Chief
Executive Ron Johnson, who after 17 months on the job failed to
win over shoppers and investors with his everyday-low-price
strategy, and rehired former CEO Mike Ullman to revive the
company. Johnson was known for his previous success as chief of
Apple Inc's retail unit.
While Jana Partners' and Farallon's stakes make up only a
tiny fraction of the total holdings at each fund - 0.05 percent
at Jana Partners and 0.09 percent at Farallon - the news is
being widely followed because J.C. Penney, more than many other
stocks, had become a battle ground for the world's biggest hedge
William Ackman's Pershing Square Capital Management waged a
long but largely unsuccessful campaign to revive the retailer
and had expected its share price to go up. But plenty of other
hedge funds were betting against a turnaround and shorting the
stock for months.
The battle over the retailer came to a head in August and
September when Ackman, J.C. Penney's biggest shareholder,
stepped off the company's board and in one fell swoop sold his
entire 17.78 percent stake of 39 million shares at the end of
August, incurring a loss of roughly $500 million.
Then the company said it would raise fresh capital, an
about-face after Ullman said he didn't see the need to raise
fresh money for the rest of the year, further shaking sentiment.
During the third quarter the share price plunged 48 percent.
The regulatory filings, which are required of money managers
whose investment firms oversee more than $100 million in assets,
do not say when Jana or Farallon bought the shares, stating only
that they held them on Sept. 30. The filings are required to
made 45 days after the end of the quarter.
The shares traded at $8.67 on Thursday afternoon, roughly
flat from the end of the quarter, falling in early October and
then recovering in subsequent weeks.
To be sure, J.C. Penney found freshly committed backers in
late August when Ackman cashed out.
Richard Perry's Perry Capital and George Soros' Soros Fund
Management were among the investors purchasing shares that
Ackman sold, sources familiar with the trades said. Also Larry
Robbins' Glenview and Kyle Bass's Hayman Capital held the shares
How some of these managers, particularly Soros, responded as
the stock price kept falling is unclear, because many have not
yet filed their so-called 13-F reports.
One fund, however, clearly had a dramatic change of heart.
Tiger Consumer Management, which had 3.27 percent of its
holdings invested with J.C. Penney, dumped all of its 5.43
million shares during the third quarter. In the second quarter,
when after Johnson was pushed out as CEO, Tiger Consumer raised
its stake by buying 2 million shares.