JC Penney And Bill Ackman Saga Ends

By Sam Lewis

Hedge fund manager takes $500 million loss in sale of stock

JC Penney (JCP) and Bill Ackman have finally ended their tumultuous relationship, as Ackman sold his stake in the 111-year-old retailer on August 27. Ackman’s Pershing Square Management firm sold its shares of JCP for $504 million, about half of what it paid for it.

The sale of Ackman’s 39.1 million shares of JCP was managed by Citigroup at $12.90 per share. Ackman’s firm was quick to acknowledge this price was nearly three and half percent lower than the August 26 closing price of $13.35. The sale completely severs the tie between JCP and Ackman, who recently resigned from the JCP board after a feud between the two.

Pershing Square became the largest shareholder of JCP in 2010, holding nearly 18 percent of the company. Ackman joined the board in 2011 and immediately began pushing for change. In May of 2011, JCP chose Ron Johnson to replace Mike Ullman as CEO. Johnson’s strategies as CEO were failures, leading to $985 million in losses and his eventual replacement by his predecessor, Mike Ullman, in April 2013.

Ackman drew anger from the JCP board after he publicly urged them to oust Mike Ullman. He also attempted to persuade the board into action by saying he had former JCP CEO Allen Questrom ready to return as chairman. These actions led to Ackman’s resignation, his agreement to sell his shares, JCP adopting a “poison pill” plan, and ultimately, the final transaction of Ackman’s stake in JCP, which is expected to close on August 30.

This year hasn’t been the greatest for Ackman as his $11 billion dollar investment firm has fallen behind some of its rivals. He is also tending to a missed opportunity with Herbalife, a weight management and nutritional supplement. Ackman accused the company of being a pyramid scheme, which the company has repeatedly denied. Meanwhile, Carl Icahn and George Saros have taken the company on, helping its shares almost double this year.

Now that JCP and Ackman have freed themselves from one another, the two can focus on their own endeavors. JCP is in the midst a turnaround initiated by Ullman, returning the company to its roots of basic merchandise, coupons, and deep discounts. Thus far, the turnaround seems to be successful, as JCP has slowed the bleeding according to its second quarter earnings report.