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J. C. Penney Company, Inc. Message Board

  • lancer2k lancer2k Apr 19, 2013 2:23 PM Flag

    Riddle me this....

    In the eventuality that the JCP Board of Directors initiates serious, internal discussions about the feasibility of bankruptcy as a possible option...would Ackman (as a member of the BoD) be able to off-load his shares? Or, would this be considered insider trading, for which there are hefty financial penalties (fines of triple the profit or triple the avoided loss) plus jail and more?

    Put more succinctly, if/when the subject of bankruptcy protection becomes a subject or item on the BoD meeting agenda, is Ackman frozen? (He would only be frozen, of course, up until the information of such discussions are made public).

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    • Hedge funds typically manage their risk on the downside of their positions with options, derivatives and other more exotic strategies that, in many cases, result in the hedge fund making a profit even when the share price falls. Think of buying an ordinary put option on a long position. That is a simple tool to hedge your downside risk. But on Wall Street, investment banking firms can make a hedge on your position as complicated as the parties involved agree to. Also, and this is a critical point, derivatives are private agreements and are typically unregulated by the SEC.

      • 1 Reply to lizard_lips_2005
      • Hedge funds typically manage their risk on the downside of their positions with options, derivatives and other more exotic strategies that, in many cases, result in the hedge fund making a profit even when the share price falls.
        /////////////////////////////////////////////

        That works and it doesn't work - - - Hedge funds have returned less than the S&P or Treasuries over the last few years - - - Ackman is a very poor example to use to support your theory - - - see 90% loss on Target or his foray into Barnes and Noble - - - his fund did well in 2010 - not so well in 2011 - not so well in 2012 - not so well so far this year - - - - - he's far from foolproof - - - - -- - he's down 200M on his JCP swaps ------------------------- in other words, his risk management works perfectly until it doesn't work - - -

    • would Ackman (as a member of the BoD) be able to off-load his shares? Or, would this be considered insider trading
      /////////////////////////////////////

      He also has a stockholder agreement between Pershing Square and JCPenney to be considered - - - 8-K dated 2-25-2011

    • beetleruss@att.net beetleruss Apr 20, 2013 8:17 AM Flag

      Pretty soon, bankruptcy will no longer be optional for JCP.

    • I believe he, as most senior management privy to inside information, is only allowed to trade on select days each quarter. These dates generally fall during periods when all information about the company is public.

    • this is something I've questioned all along (sorry, I'm not exactly a financial guru). How on earth is a fund manager allowed to even BE on the Board of Directors of a company whose stock it trades? To me it would ALWAYS be insider trading.

      • 1 Reply to janecash34
      • As an "activist investor" Ackman often makes huge investments with the proviso that he gets a seat on the board (could be seats on the board as well). He has done this, most recently (as far as I know) with P&G. Once on the board, he usually bullies the companies into making management changes (he tried this with P&G and has - so far - been unsuccessful. Unfortunately, he was successful with JCP).

        As a rule, Ackman invests in companies which are undervalued. Pershing Square seeks to tap that underperforming value and generate a profit. Theoretically, this is good for all shareholders if Ackman is successful.

        Ackman, like any other member of the board, has access to inside information and he has - like all board members and senior managers at JCP to abide by SEC rules and regulations regarding insider trading. Any trades by Ackman (sales or purchases) will be large block trades and draw close scrutiny. The penalties for insider trading are severe if one is caught. Fines, penalties of triple the amount gained or the loss averted, jail time, etc. He would risk losing everything - e-v-e-r-y-t-h-i-n-g - if he violated the insider trading rules and regulations. Like Martha Stewart, he would be a convicted felon.

 
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