What are you going to do in a situation where management issues a statement that a turn is at hand, quelling a certain decline in a stock, and then uses its own rosy projections to offer 84 million shares at a higher price than if it just kept its mouth shut? Isn't that what really happened at J.C. Penney JCP yesterday? The company, in an attempt to clarify impressions that it might not need money, sent its stock higher with rosy news of same-store sales projections, and then issues equity that you would have thought it otherwise wouldn't need if you took the company at face value.
To me, the story stinks, no two ways about it.
The betrayal is petty thick here, especially when you see that the firm's controller resigns at the same time the offering was filed.
I hated J.C. Penney all the way down until the two former insiders, Bill Ackman, and Vornado, punted their stock, and I thought it was worth a shot to buy their exit blocks. Many others did, too. In retrospect, while their buys were clearly terrible, their sells look pretty darned prescient at this moment.
No matter that PVH PVH CEO Manny Chirico told me on "Mad Money" that apparel had softened dramatically -- apparel being J.C. Penney's mainstay business, and I tempered my enthusiasm. I said I thought the bottom had been reached and that was wrong, and I have to suffer the catcalls that come with that incorrect judgment.
It happens. I regret the faith I put in management's protestations that business had improved, and I am sorry for trusting them. I am acutely aware that some on the Web are blaming me for their losses, and that's going to happen periodically when you trust a company when it says it has seen a positive turn. I am a big target, and, while I do wish people would recognize that I had been negative on J.C. Penney for ages, I feel as had as everybody else, believe me. It's not the first time I believed a management and then the management, in my opinion, led me astray. It won't be the last time, either. Plus, we don't know how this ultimately plays out, but I agree with my friend Doug Kass that this one's about as outrageous as it gets.
Now, barring an actual turn in the fortunes of retail in this country, J.C. Penney could limp through the holiday season, having raised this money in the equity market, but I think it will take a very long time for trust to be restored, especially when the whole group's hated anyway.
The most important lesson? Sometimes you just get had.