NEW YORK (
) - Former
(JCP - Get Report)
chief executive Ron Johnson is poised to lose $50 million on a warrant contract he purchased when he joined the company.
Johnson left his former position as head of retail operations at
(AAPL - Get Report)
, before joining J.C. Penny in June 2011.
When Johnson joined J.C. Penney, he took a $50 million warrant position in the company's shares as a vote of confidence in the turnaround plan he was brought on to execute. Johnson's 7,256,894 warrants to buy J.C. Penney shares, which he bought for $6.89 a share, had an exercise price of $29.92.
, the over 7 million in stock warrants couldn't be exercisable until 2017, unless Johnson was fired or left the company through a voluntary resignation. At that point, J.C. Penney's stock price would have to be in excess of the sum of the the warrant exercise price and the price paid for the warrant, to hold any value.
Unfortunately for Johnson,
his resignation from J.C. Penney
on Monday means that the warrant contracts purchased in 2011 become immediately exercisable and thus are currently worthless given the company's closing share price of $15.87.
Johnson's warrant contracts had an exercise price close to J.C. Penney's share price when he came onboard the company in the summer of 2011.
J.C. Penney shares, which had fallen nearly 20% in 2013 though Monday's close, fell over 7% in after-hours trading after the company announced former chief executive Mike Ullman will return to the company.
-- Written by Antoine Gara in New York