David Einhorn Closes Bet Against J.C. Penney

Joe Goldman |

David Einhorn announced on Friday that his $8 billion hedge fund has closed a short position in J.C. Penney (JCP) . In a quarterly note to his investors in Greenlight Capital, Einhorn said that the fund liquidated its position in April 2013 after the Board fired then-CEO Ron Johnson.

Johnson was hired as CEO in November 2011 after leaving his job as Apple’s (AAPL) Senior VP of Retail Operations, where he was heralded as one of the greatest minds in retail history. His success, however, did not carry over into his job at J.C. Penney.

“We doubted the new strategy would succeed. We covered when the Board fired the CEO before he could turn the company into a penny stock,” Einhorn said in the note, according to Reuters. He called the trade his hedge fund’s most profitable short of 2012.

J.C. Penney’s strategy to replace heavy discounts and coupon campaigns with everyday low prices was a total flop. Comparable sales plunged 25 percent during 2012, sending the stock from $43 per share in February 2012 to under $14 around a year later.

In the note, Einhorn also announced that the company liquidated a long position in Microsoft (MSFT) . He seems to have become disgruntled by Microsoft’s lack of direction and inability to grow market share.

“Windows 8 appears to be a flop, and a decade of mismanagement has put Microsoft at risk of becoming a shrinking company,” the letter said.

J.C. Penney shares popped on the news. Shares traded 2.2 percent higher on Friday to $16.48. Meanwhile, Microsoft shares didn’t flinch on the announcement, gaining 0.3 percent for the day.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 113.95 1.83 1.63 34,402,627
JCP J.C. Penney Company Inc. Holding Company 10.21 -0.35 -3.31 15,424,406
MSFT Microsoft Corporation 61.97 0.96 1.57 27,349,356
FCOB 1st Colonial Bancorp Inc 10.00 0.00 0.00 0

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