JCPenney (NYSE: JCP) is catching some attention today after a shareholder took up a lawsuit against the company over its decision to issue 84 million shares in a public offering.

Shareholder Alan Marcus filed the suit in Texas on Tuesday. Curiously, Marcus bought just 300 shares of the stock on September 26th, ahead of JCPenney's equity raise announcement. More curiously, the market was speculating that JCPenney would perform a $1 billion offering long before September 26th.

The shareholder accused JCPenney of knowing that it didn't have enough liquidity to make it through the holiday and didn't disclose this to investors.

Reuters cites the shareholders lawsuit as saying, ...As a result of defendants' false statements, JC Penney stock traded at artificially inflated levels...

Shares of JCPenney dropped 13.1 percent the day following the announcement, prompting the shareholder to file the suit. BTIG issued a few constructive comments about the move. Some market watchers noted that CEO Mike Ullman might have been misquoted last week when he said on CNBC that he didn't see conditions this year where we need to raise liquidity. The analyst thinks JCPenney was planning more to keep financial flexibility open heading into 2014 and didn't want to raise any flags with a securitized debt offering, which might put some vendors off.

To us, it seems like a rather short time period to hold stock before looking at a class action. Those JCPenney holders that have been in the stock since it was around $30 might have a better argument.

Shares of JCPenney are lower in early trading Wednesday.


UPDTE - The full PR about the suit is reprinted below:

Robbins Geller Rudman & Dowd LLP announced that a class action has been commenced in the United States District Court for the Eastern District of Texas on behalf of purchasers of J.C. Penney Company, Inc. (“JCPenney”) (JCP) common stock during the period between August 20, 2013 and September 26, 2013 (the “Class Period”).

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Darren Robbins of Robbins Geller at 800/449-4900 or 619/231-1058, or via e-mail at [email protected]. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.rgrdlaw.com/cases/jcpenney/. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The complaint charges JCPenney and certain of its officers and directors with violations of the Securities Exchange Act of 1934. JCPenney is a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. JCPenney’s business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. The Company sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney and home furnishings.

The complaint alleges that throughout the Class Period, defendants violated the federal securities laws by disseminating false and misleading statements to the investing public in connection with the Company’s finances. Specifically, defendants failed to disclose and/or misrepresented adverse facts, including that the Company would have insufficient liquidity to get through year-end and would require additional investments to make it through the holiday season, and that the Company was concealing its need for liquidity so as not to add to its vendors’ concerns. As a result of defendants’ false statements, JCPenney’s stock traded at artificially inflated prices during the Class Period, reaching a high of $14.47 per share on September 9, 2013.

Then, on September 26, 2013, analysts reported that the Company would need to take on additional debt to ensure that it had enough cash to keep its business operations going. On September 27, 2013, JCPenney issued a press release announcing the pricing of 84 million shares of its common stock at $9.65 per share in a secondary offering, stating that “[t]he Company intends to use the net proceeds from the offering for general corporate purposes.” On this news, JCPenney’s stock fell $1.37 per share to close at $9.05 per share on September 27, 2013, a one-day decline of 13% on volume of 256 million shares.

Plaintiff seeks to recover damages on behalf of all purchasers of JCPenney common stock during the Class Period (the “Class”). The plaintiff is represented by Robbins Geller, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.