market folly

Richard Perry's hedge fund firm Perry Capital has just filed a 13D with the SEC regarding shares of J.C. Penney (JCP).  Per the filing, Perry now owns 7.26% of JCP with 16,000,000 shares.  This is a brand new position for the hedge fund.

The filing was required due to activity on August 9th.  However, Perry started buying JCP shares as early as June 12th at $17.77 and throughout July and into August.  Their most recent disclosed purchases come on August 1st at around $14.86.

Perry owned 12 million JCP shares as of June 30th, and then has purchased an additional 4 million shares since then.  With the slide in JCP shares down to current levels of $12.81, Perry is already down on this position.


Perry's Letter to JCP's Board

Below is the letter Richard Perry sent to the Board of Directors today:

"August 9, 2013

Dear Mr. Engibous and the J. C. Penney Company Board of Directors,

Perry Capital currently owns shares representing beneficial ownership of 7.26% of J. C. Penney Company. Shareholders and creditors have increasingly lost confidence in the company, as evidenced by the recent significant decline in the company’s stock and bond prices.  This market reaction is particularly alarming given the company’s meaningful improvement in liquidity following its $2.25 billion term loan financing. We strongly urge the Board to take immediate and proactive steps to improve the financial and operational management of the company.

Assuming recent press reports are accurate, Perry Capital would be very supportive of a return to the company by Allen Questrom and Ken Hicks. While we appreciate Mike Ullman’s willingness to assume the interim CEO role at a critical juncture, we believe it is imperative that the Board promptly establish a Board and management structure that provides the company the greatest chance for success. We believe that immediately appointing Allen Questrom Chairman of the Board and Ken Hicks CEO is imperative at this juncture, and we anticipate that the company’s various constituents would be highly supportive of such a change. In the words of Citigroup retail analyst Deborah Weinswig in a publicly available research note:  “Questrom + Hicks = Dream Team” (Dear Board of Directors, Time is of the Essence! August 9, 2013).

Given the urgent nature of the situation, I am releasing this letter publicly so that other shareholders who feel the same way can express their opinions directly to the Board. 

Sincerely, Richard Perry"