J.C. Penney Faces SEC Inquiry Regarding Financial Position, Stock Sale

(RTTNews) - J.C. Penney Co., Inc. (JCP) said Thursday that the U.S. Securities and Exchange Commission has asked the struggling department store chain for information about its financial position as well as details about a stock sale announced by the company in September. The company's shares declined almost 4 percent in extended trades following the news.

In a regulatory filing, J.C. Penney said that on October 7, 2013, it received a letter of inquiry from the SEC requesting information regarding the company's liquidity, cash position, and debt and equity financing, as well as the company's underwritten public offering of common stock announced on September 26, 2013.

The Plano, Texas-based company said it is cooperating with the SEC's inquiry and is providing material requested by the regulator.

In late September, J.C. Penney announced plans to raise up to $1 billion in new capital. The plan was revealed after two of the company's largest shareholders, New York-based real estate investment trust Vornado Realty Trust (VNO) and billionaire William Ackman's hedge fund Pershing Square Capital Management, L.P., exited their respective stakes in the company.

At that time, J.C. Penney said it commenced an an underwritten public offering of 84 million shares of its common stock at $9.65 per share and intended to use the net proceeds from the offering for general corporate purposes. The company added that it planned to grant the underwriters a 30-day option to purchase up to an additional 12.6 million shares of its common stock.

A day earlier, J.C. Penney's stock tanked 15 percent on fresh liquidity concerns after a report by Goldman Sachs suggested that the company's liquidity levels would likely be strained in the third quarter and initiated coverage of its stock with an underperform rating. Analysts had warned bond investors to buy protection in the form of credit default swaps in the event J.C. Penney defaulted on its debt.

That was followed by J.C. Penney CEO Myron Ullman's announcement that the company would not require to raise cash this year. But later, J.C. Penney stated it would raise funds from an offering managed by Goldman Sachs.

In late November, J.C. Penney reported a wider loss for the third quarter compared to the prior year. The company's net loss for the third quarter widened to $489 million or $1.94 per share from $123 million or $0.56 per share in the year-ago period. Total net sales for the quarter decreased 5 percent to $2.77 billion from $2.93 billion in the same period last year.

S&P Dow Jones Indices said in late November that Allegion plc (ALLE) will replace J. C. Penney in the Standard & Poor's 500 Index. J. C. Penney will replace Aeropostale Inc. (ARO) in the S&P MidCap 400 and Aeropostale will displace Corinthian Colleges Inc. (COCO) in the S&P SmallCap 600 after the close of trading on November 29.

S&P stated that J. C. Penney's and Aeropostale's market capitalizations were now more representative of the mid cap market and small cap market spaces respectively.

JCP closed Thursday's regular trading session at $8.85, down $0.81 or 8.39 percent on a volume of 69.88 million shares. In after-hours, the stock further declined $0.34 or 3.84 percent to $8.51.