The decision by JC Penney Co to strengthen its cash reserves by the issuance of new USD1 billion in new shares resulted in a decline in its stocks by more than 13% last Friday. The US retail giant had lowered its year-end cash reserves, allowing many to conclude it is spending monery above its expected levels.
Penny mentioned it had offered the 84 million shares at USD9.65 per share, with a later option for underwriters to purchase another 12.6 million shares.
The decision came after many options to raise cash was discussed. By September 6, Penney reported a total debt of USD5.82 billion in its stock offer prospectus and this has been the major drawback to raise new funds through a credit facility.
According to JC Penny CEO Myron Ullman, "We could not risk losing the confidence of our Associates or our supplier partners, both of whom are paramount to our long term success." The remarks were made through a note sent to all store employees on Friday and was received by Reuters.
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