Run, don't walk, from J.C. Penney's latest stock offering. Photographer: Patrick T. Fallon/Bloomberg
Run, don't walk, from J.C. Penney's latest stock offering. Photographer: Patrick T. Fallon/Bloomberg

One day after J.C. Penney Co. announced it was pleased with the way its turnaround efforts were going, the company offered another piece of news: They’d be selling 84 million shares in the hope of raising almost a billion dollars.

If there’s a way to read this that doesn't ultimately spell “desperate,” I've yet to see it. How desperate? I’ll let Agustino Fontevecchia of Forbes sum up for you:

The bad news just doesn’t seem to stop for J.C. Penney. The embattled retailer saw its shares fall dramatically in afterhours trading on Thursday after the company announced plans to issue 84 million shares, with Goldman Sachs as the sole underwriter. Goldman, whose own research department caused a massive double digit decline in the stock a few days ago with a scathing research report that called for shorting the company, has the option of selling an additional 12.6 million shares within 30 days. Hours before, the company’s controller had announced he was resigning.

No wonder investors are only willing to buy their shares the way customers buy their merchandise -- at a deep discount.

It’s easy to see why J.C. Penney would want to sell shares: They need cash either to turn themselves around, or slow the inevitable slide into bankruptcy. But why investors would buy them is hard to see. The company’s core demographic is exiting middle age and headed for “elderly,” and their current shoppers are not being replaced by younger versions. They’re also heavily weighted toward the lower middle-class -- almost one-third of their customers make less than $35,000 a year. That’s a bad market niche to have when the middle class is struggling.

Almost the only person you can picture buying the shares is someone contemplating a takeover offer. But what’s to take over? Their main asset, aside from a declining brand, is real estate in shopping malls. That real estate is not as valuable as it once was, as malls get hit by a triple whammy: High-income shoppers are relocating to urban cores, the Internet is eating away sales at all income levels, and trends are shifting away from giant indoor malls toward outlet malls and smaller outdoor complexes that offer more of a “Main Street” experience. They’ve already tried a spectacular turnaround, under Ron Johnson; it failed spectacularly. At this point, we seem to be talking about managing the decline. Who wants to sign up to ride a money-losing cash-cow into oblivion?