PLANO, Texas – The boardroom drama may be over, but J.C. Penney is still grappling with an uncertain future.
William Ackman has resigned from J.C. Penneys board as part of a deal to resolve an unusually public battle between the activist investor and the struggling department store operator.
Ackmans departure provides some short-term relief from a distraction for Penney while it tries to fix its ailing business and as the crucial back-to-school selling season heats up.
But investors pushed the companys stock price lower Tuesday as they worry about Penneys long-term struggle to turn its business around.
The share decline also reflected worries that Ackman might sell shares. Ackmans Pershing Square Capital Management is Penneys biggest stockholder with a 17.7 percent stake. CNBC quoted Ackman as saying he had no immediate plans to sell.
(Penney) got the thorn out of their inside, but theyre both real losers here, said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware. Its bad news for Penney because if Ackman sells his stock, it will hurt the stock price. If he doesnt, he will still exert a big influence on the company, albeit from the outside.
As for Ackman, the activist investor no longer has an inside view into the company. And whether he sells near current prices, he will lose a lot of money.
Ackman went public last week with statements saying hed lost confidence in Penneys board and that Chairman Thomas Engibous should be replaced. Ackman and the retailers board also were bickering over how quickly the company should replace CEO Mike Ullman.
On Tuesday, Penney named Ronald Tysoe as a director to fill Ackmans seat. Tysoe is former vice chairman of Federated Department Stores Inc., which is now Macys Inc. Penney will name an additional new director in the near future.