Reports have been circulating for months that JCPenney, the embattled American retail chain, might have to seek bankruptcy protection over its rising debts and dwindling sales. The issue is that JCPenney is fighting over a market share in an increasingly competitive space amidst the backdrop of a global economic slowdown. American consumers are having a hard time bringing themselves to go into JCPenney outlets and, as a result, the company is on the verge of collapse.
Leadership changes, a bleeding stock price and rumors of internal conflict haven't helped JCPenney's case. A recent note published by Goldman Sachs confirmed these issues, in which the U.S. bank suggested that investors may want to consider buying credit-default swaps in order to protect themselves.
According to the New York Post, the bankruptcy rumors are fueled by the fact that, barring a successful holiday shopping season, JCPenney might not have the investor optimism necessary to keep its stock price afloat. Stocks fell 7.4 percent on October 15, and could plunge further if these fears turn into reality. A spokesperson from the company told the Post that "no truth to the rumor" existed and that JCPenney's liquidity levels were normal.
If you're an investor in JCPenney, you have some tough choices ahead. A bankruptcy for JCPenney could be messy, considering its large debt profile. However, it reportedly has $2 billion worth of liquid assets on its books that could provide some recourse.
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Categories: Stock News