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The Deal: J.C. Penney Investors Suffer Whiplash

What the J.C. Penney statement said was: "The Company still anticipates it will experience positive comparable store sales trends coming out of the third quarter and throughout the fourth quarter of 2013."

The operative word being "trends," which is not the same thing as actual sales figures. So, while perhaps being technically correct, the retailer isn't necessarily saying that it won't be in negative territory for the rest of the year.

Not only could a poor holiday season undermine J.C. Penney, but the poor performance of its overhauled home departments, in which the company sunk so much cash, could be another nail in the coffin. Rather than getting a return on cash already spent, the company will have to spend even more money for a do-over to correct its multi-million dollar mistake.

According to one industry banker, the situation is such a "mess" at J.C. Penney at this stage, that "there is no way that this ends well."

Nonetheless, extra cash would help the retailer survive into the next year, especially if factors are tightening lines of credit for vendors supplying the department store.

Based on the chain's closing price of $10.42 per share Thursday, 84 million shares would raise about $875 million. If the option is fully exercised, the amount raised would be about $1 billion.

Goldman Sachs (GS) is the sole underwriter for the offering. Earlier this year, the bank arranged $2.25 billion in loans to the beleaguered retailer backed by its real estate, ostensibly to give it enough cash to last through the holiday season.

In July, Moody's Investors Service calculated J.C. Penney would burn through $1.4 billion in cash by year's end, and, in the second quarter the retailer said it had spent more than $700 million, but before it had to shell out for holiday inventory.

Investors: Do the math.

Written by Richard Collings

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