(This is an excerpt from an article I originally published on Seeking Alpha on October 21, 2013. Click here to read the entire piece.)
Last month Coldwater Creek (CWTR) issued an earnings report that made it pretty clear the company is headed toward bankruptcy unless it finds an 11th hour savior. {snip}
Source: FreeStockCharts.com
The kitchen sink came in the form of CWTR overwhelming investors and traders with a heavy load of bad news combined with a de facto information blackout all thinly dressed up under the rhetoric of “shareholder value.” {snip}
Adding to the market angst, CWTR has decided to stop providing quarterly guidance “..until such time as its business returns to a more predictable cadence.” The information blackout will be complete because CWTR will also not release any updates on any of the strategic alternatives it may pursue including, but not limited to “…partnerships, joint ventures or a sale or merger of the Company.” {snip}
However, this is exactly where the speculative buying opportunity comes when trading at the edge of bankruptcy. {snip}
I am now watching CWTR closely because this trade could be a dress rehearsal for what is to come for J.C. Penney (JCP).
{snip}
JCP listed improving sales trends, strong liquidity, “rebuilding its base of highly satisfied and loyal customers,” stocking the correct inventory, and new leadership as compelling positives. It also admitted that is still struggling with its new Home Store concept and strategy. {snip}
You can bet the minute someone hollers bankruptcy at JCP in a crowded trading pit with even a shred of credible evidence, traders and investors will be selling first and asking questions later…
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on October 21, 2013. Click here to read the entire piece.)
Full disclosure: long JCP puts