J.C. Penney Drops as Ackman Selling Entire Stake (Update 1)

This story has been updated from Aug. 26, 2013 with additional information.

NEW YORK ( TheStreet) - Pershing Square Capital Management's Bill Ackman is selling his entire stake in J.C. Penney ( JCP).

The activist investor and J.C. Penney's largest holder of common stock announced in a release as well as a registration offering by the retailer with the Securities and Exchange Commission that Pershing Square would be selling all 39 million shares.

The stake, about 18% of the struggling retailer's common stock, is worth about $504 million, based on an offering price of $12.90 a share.

J.C. Penney will not receive any proceeds from the sale of the shares.

Citigroup is acting as sole book running manager and underwriter for the offering. The offering is expected to close on Aug. 30, 2013.

J.C. Penney shares were falling an additional 2% to $13.08 in pre-markets trading on Tuesday.

In addition to the Pershing Square stake sale, there's also the looming threat of Vornado Realty Trust ( VNO) selling its stake. The New York-based real estate investment trust owns 6.1% or 13.4 million shares of the Plano, TX.-based retailer. Vornado Chairman Steven Roth still sits on J.C. Penney's board.

Last week the company reported a worse-than-expected net loss of $586 million, or $2.66 a share, in the second quarter chock full of extraordinary charges pulling the number down. Net sales slumped 12% year-over-year, and gross margin fell to 29.6% in the quarter. The company plans to end the year with $1.5 billion of cash.

The dismal earnings results followed a very public battle with Ackman, who sought to shake things up at the board and executive levels to get the company's turnaround moving faster. Ultimately, Ackman lost that battle and resigned his board seat.

Ackman recently signed an agreement with the company to start selling his 18% stake in the retailer.

J.C. Penney on Thursday said that it adopted a stockholder rights plan in hopes to make it more difficult for anyone to acquire or own more than 10% of the company.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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