J. C. Penney Company Inc. (NYSE: JCP) remains challenged. A new release from the company signals one of two outcomes. First is that it could be taken over against its will. The second is that the company thinks it can become profitable again in the near future. Or there is a third and most likely option. Effectively, this change makes a poison pill kick in at a much lower threshold and it puts unwanted acquirers and activist investors in a very weak position.

J.C. Penney’s board of directors has amended the shareholder rights plan, in what it says is to protect its valuable net operating loss carryforwards (noted as NOLs). When companies amend their shareholder rights plans, usually defensive against takeovers, they can make the company harder to acquire. Unfortunately, this can also create other triggers, even if outside shareholders take too large of a stake. Again, investors need to understand that this lowers the poison pill threshold.

The company claims to have more than $2 billion in NOLs. These can be used to offset future taxable income and reduce federal income tax liability under certain circumstances. Unfortunately, the ability to use these losses dries up if ownership changes. The company even said:

Ownership changes under Section 382 generally relate to the cumulative change in ownership among stockholders with an ownership interest of 5% or more (as determined under Section 382’s rules) over a rolling three year period. The amended rights plan was adopted by the Board to reduce the likelihood of an “ownership change” occurring.

The amendments to the shareholder rights plan extend the plan’s expiration date from August 20, 2014, out to January 26, 2017.

The big change is that this lowers the beneficial ownership threshold for a person or group to become an “acquiring person” under the plan from 10% previously all the way down to 4.9%. If any person or group acquires 4.9% or more of the outstanding shares of common stock without board approval, it will trigger significant dilution in the ownership interest of such person or group. The good news is that existing stockholders who currently own 4.9% or more of the outstanding shares of common stock will trigger a dilutive event only if they acquire additional shares. Still, today’s move is to make the company immune to new outside pressure.

J.C. Penney said that the amended rights plan takes effect immediately, and the company expects to submit the amended rights plan to a vote at the next annual meeting of stockholders in May 2014. If stockholders do not approve the amended rights plan, it will be terminated.

Apparently investors are not as trusting of what this message means. Very few believe that someone is willing to acquire J.C. Penney. The move now makes it less susceptible to activist investors who may come in after January to push for management issues or to even push for a sale of all or part of the company.

We recently forecast that the company’s 33 store closures was far too little of an effort. If J.C. Penney cannot determine that its woes cannot be fixed in only 3% of its stores, then this new poison-pill trigger will make it impossible for any other holder to make them understand it too.

Maybe Mike Ullman will be good for shareholders in the long run. Or perhaps not. This new move makes the board fully committed to Mike Ullman’s plan. It is surprising that the stock is not lower on the day, although the stock had fallen more than 5% from the best prices just a week ago. J.C. Penney shares were up 0.5% at $6.54 in mid-morning trading.

J.C. Penney can try to hide behind the logic of protecting its harvested tax losses all it wants. It should not require too much thought to see what the company’s board of directors is really trying to protect here.

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