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J.C. Penney Could Become Shutdown Casualty

Tickers in this article: COST JCP WMT
NEW YORK (TheStreet) -- A government shutdown is depressing, no matter how you feel politically.

A government employee at our yoga class told my wife yesterday she may not be working today. This news didn't have my wife in any mood for a shopping spree, either.

She especially didn't want to spend any time today in a mall, with its pretense that everyone is happy. Especially not a mall with a J.C. Penney , where shutdown fears are getting personal.

Penney is even giving billionaires the blues these days. Perry Capital is now following Bill Ackman's Pershing Square out of the stock, tail between its legs and deeply hurt in the pocket. The company has cut its Penney stake from 8.62% to 3.28%, according to its Securities and Exchange Commission filing, and it took a loss on that.

That's because the price of Penney stock is falling faster than thin-count sheets at a white sale, dropping below $9 a share yesterday. When trading opened today, the whole company was worth less than $2 billion, this for an outfit still on pace to have sales of at least $10 billion this fiscal year.

Even Penney's underwriter, Goldman Sachs, may be sitting on a loss. The company announced an offering of 84 million shares through Goldman, closing today, at an offering price of $9.45, which is over 50 cents higher than what the shares were recently selling for on the New York Stock Exchange.

Things could easily get worse for Goldman, because it issued a warning on the company's debt just last week, after arranging a $2.25 billion term loan for the company earlier this year. Goldman's defense is that its right hand is not allowed to know what its left hand is doing.

Penney Chief Executive Mike Ullman is now a retailer whose credibility is at zero. He went on CNBC last week insisting he didn't need to raise equity, and then the next day announced an equity offering.

Retailing is all about trust. Suppliers ship you goods on trust, trusting that you will pay the agreed-upon price. When trust is lost, supplies are pulled, shelves are laid bare, and retailers can die quickly.